Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

CROMARTY PETROLEUM ORDER CONFIRMATION BILL (By Order)

Order for Second Reading read.

To be read a Second time upon Thursday next.

Oral Answers to Questions — NATIONAL FINANCE

Public Expenditure

Mr. Moate: asked the Chancellor of the Exchequer if he expects to make an early statement on cuts in public expenditure.

Mr. Gwilym Roberts: asked the Chancellor of the Exchequer if he is now in a position to make a statement on future levels of public expenditure.

Mr. Michael Marshall: asked the Chancellor of the Exchequer if he will make a statement on future levels of public expenditure.

The Chancellor of the Exchequer (Mr. Denis Healey): I refer the hon. Gentleman and my hon. Friend to the answer my right hon. Friend the Prime Minister gave to the Rt. Hon. Member for Finchley (Mrs. Thatcher) on 29th June, following his statement about the Puerto Rico summit meeting.

Mr. Moate: While the right hon. Gentleman's conversion to the need for public expenditure cuts will be welcomed by all sections of the House, is it not clear that his own record of massively increasing public spending in his first years as Chancellor of the Exchequer has been a

major cause of our economic troubles? When he makes such a massive admission of error, how can he expect to instil confidence at home and abroad?

Mr. Healey: I dare say that I made the mistake of following my predecessor, Lord Barber, who increased public expenditure by over 8 per cent. in 1973. We are getting the economy into better balance and I am sure the hon. Member will agree with the Banker, which in an article today says that, although it is not wholly satisfied with Government policy, at least it is better than having no policy at all, like the Opposition.

Mr. Roberts: Does not my right hon. Friend realise that further public expenditure cuts at this stage are likely to antagonise the activist sections of the trade union and Labour movements by feeding the appetites of the Tories and international blackmailers? Does he not agree that he is likely to increase that appetite by making further cuts?

Mr. Healey: I realise that no Labour Government welcome cuts in public expenditure, and neither does the Labour Party or anyone else who supports it. There are, however, times when a Government must accept their responsibility for keeping the economy in balance, and that will be done. As to feeding the appetite of the Opposition, my hon. Friend will agree that the sort of food that I give them is not always to their taste.

Mr. Marshall: Is the Chancellor of the Exchequer aware that his answer is totally unsatisfactory and that it smacks of the kind of political compromise which is becoming intolerable? Does he not agree that he is more concerned about consultations with his hon. Friends than with the needs of the country at large? What has he to say to that?

Mr. Healey: I have been asked what I have to say to that. I shall control myself, Mr. Speaker, because I know that you have a deep regard for the proper proprieties of our institutions. The Government face—[AN HON. MEMBER: "Defeat."] Not defeat. We have to maintain a relationship with the trade union movement—and that has won international praise, not least from the International Monetary Fund—while at the same time making adjustments in the


economy which are required to make the rest of our policies successful. No doubt I shall succeed on this occasion, as I have done in the past.

Mr. Cyril Smith: Can the Chancellor of the Exchequer say anything about cuts in expenditure that he has imposed upon the Home Office and which have resulted in a situation in which prison officers can no longer take prisoners half-way through murder trials to continue those trials in the Crown courts? Is he aware of the situation that judges are sitting but cannot hear a trial because there is no prisoner? We have been told in the local Press that that is a consequence of cuts in public expenditure.

Mr. Healey: I welcome the fact that the hon. Gentleman has decided to add his weight to the Liberal Front Bench—after some misgivings, which all of us on this side of the House well understand. The question he has just asked me would be better put to my right hon. Friend the Home Secretary, as no doubt the hon. Gentleman recognises.

Mr. Watkinson: Does my right hon. Friend accept that, now that the economy is expanding, the growth should produce a fall in the public sector borrowing requirement next year? Is he in a position to tell the House what sort of fall he envisages as a result of the growth that is now taking place?

Mr. Healey: I am not in a position to make an estimate of that but, as I have often said, between one-third and one-quarter of the present sector public borrowing requirement results from unemployment. As unemployment comes down, the public sector borrowing requirement will come down with it, but nothing like enough to make room for the expansion of exports and investment which is our objective.

Sir G. Howe: Does the Chancellor of the Exchequer accept that the time has ended when he can simply go on chuckling through with backward looks at the past? Is it not time for reductions in public expenditure to be genuine and to come soon? Does he agree that they will have to exceed the figure of £1 billion which has been widely bruited around for so long that it is already discounted? Is he not making the task

harder for himself by prolonging the process of re-educating his party?

Mr. Healey: Those words were sombre, even to the point of pomposity. I am not prepared to be lectured by the right hon. and learned Gentleman, with his record and the record of his Government, about the need to control the public sector borrowing requirement and the money supply.

Contingency Reserve

Sir Nigel Fisher: asked the Chancellor of the Exchequer whether the additional public expenditure of £400 million announced for the present financial year will be charged to the Contingency Fund and is within what remains of that fund.

Mr. MacGregor: asked the Chancellor of the Exchequer what is the amount committed to date in 1976 for expenditure from the Contingency Fund; and what percentage this represents of the total amount allocated for the year.

The Chief Secretary to the Treasury (Mr. Joel Barnett): On the assumption that the hon. Gentlemen are referring to the Contingency Reserve rather than the Contingencies Fund, I would refer them to the answer my right hon. Friend the Chancellor gave the right hon. and learned Member for Surrey, East (Sir G. Howe) on 7th June.

Sir Nigel Fisher: I am very inexpert in these matters, but even if the extra expenditure falls on and within the Contingency Fund is it not rather odd to be increasing Government spending when by general consent, except that of some Labour Members below the Gangway, it should be drastically reduced?

Mr. Barnett: I find that quesetion rather odd, because many of the hon. Gentleman's hon. Friends, and I think he himself, are constantly demanding that we should increase public expenditure in certain areas and on certain programmes. I could make a huge list of their demands to increase public expenditure. I have noted what the Opposition say on these matters, but I prefer to stand on what we are doing.

Mr. MacGregor: Is it not the case that a quite high proportion of this year's Contingency Reserve has already been committed in a short part of the year?


Does not that cause additional worries that there is no proper control yet over public expenditure even this year, let alone next?

Mr. Barnett: I do not accept that. As the hon. Gentleman knows—he is a member of the General Sub-Committee of the Expenditure Committee—about £400 million has been committed out of the £875 million Contingency Reserve. But we have made it absolutely clear time and again that there is no question of that Contingency Reserve being exceeded in 1976–77. The method of control of public expenditure is enormously improved on what it was under the hon. Gentleman's Government. The present Government will ensure that there is no extra over and above the Contingency Reserve as set out in the last White Paper.

Corporation Tax

Mr. David Mitchell: asked the Chancellor of the Exchequer what is the rate of return of corporation tax for those firms paying the lower rate of corporation tax in the years 1966 and 1975, or at the latest date for which figures are available; what is the rate of return for those firms paying the higher rate of corporation tax in the same years; and if he will publish a table showing the figures for the intervening years.

Mr. Joel Barnett: I am afraid it is not clear to me what the hon. Member means by "rate of return of corporation tax". If by "firms paying the lower rate" he has in mind the small companies rate, there was, of course, no such rate for profits arising before 1973–74. It is estimated that the yield in 1975 from companies paying at the small companies rate might be about £250 million.

Mr. Mitchell: The figure of 14 per cent. has been bandied around as the overall rate of return on corporation tax by small and large companies. The question I hoped that the right hon. Gentleman might be able to answer was whether small firms were benefiting from the concessions through stock relief and similar matters to the same extent as large firms. I hope he will accept that small firms are much more reliant than large firms on retained profits and that the impact of corporation tax on them and their ability to expand is considerable.

Mr. Barnett: I know that the hon. Gentleman has accepted that the corporation tax system introduced by his party was not helpful to small companies. We extended substantial corporation tax relief to small companies by way of stock relief and the 100 per cent. first-year allowance, which is of enormous benefit to companies, particularly small expanding companies.

Mr. Robinson: Is my right hon. Friend aware that the vast majority of trading and manufacturing companies pay very little mainstream corporation tax, and that that can no longer be used as an excuse by industry or the Opposition for their inability to increase output and investment as required to meet our national economic objectives?

Mr. Barnett: I very much agree, but I hope my hon. Friend will recognise, as I am sure he does, that we have acted in a selective way rather than through a straightforward reduction in the rate of corporation tax, which the Opposition pressed upon us. We have given the relief to those companies which are investing in new stock and new capital. That is the way to do it. I believe that most people, both inside and outside the House, recognise that.

Mr. David Howell: The right hon. Gentleman mentioned stock relief. Is he aware of the way in which gigantic deferred tax liabilities are being built up in company balance sheets, and that there is growing pressure that something should be done about what is an increasingly difficult situation for companies? Will he give us a clue as to how he will start unscrambling an increasingly serious situation?

Mr. Barnett: I am, of course, aware that the relief is deferred, but I do not think that the Opposition can be serious in the sort of amendments they press upon us in Finance Bill debates when they seek to make the relief permanent, because companies could simply take the stock relief, close down and make a tax-free profit. Unlike the Opposition, most people outside the House recognise that that would be nonsense. The hon. Gentleman knows very well that, for a company which continues its expansion, continues to build up its stock and continues to invest in new plant, there is no


problem here. The deferred tax remains in the sense that there will be no tax liability. To do what the hon. Gentleman and the Opposition have suggested would be absurd.

Mr. Nott: If stock relief is not to be part of the net worth of the business—and it cannot be if the right hon. Gentleman says that it is not to be available in a liquidation—how can this benefit British industry in its expansion? The banks will lend only if the stock relief is part of the assets, part of the net worth of the business. That is the point we have been making since the relief was introduced.

Mr. Barnett: I am surprised at the hon. Gentleman, who will be aware that we are not talking about helping those companies which want to liquidate. We are talking about helping companies which are expanding and continuing. It is nonsense to suggest that companies should be given the relief as an absolute relief so that when they liquidate they can take advantage of it. I am astonished at the hon. Gentleman, who should know better.
I recognise that there is a presentational problem on the company's balance sheet—but that is all it is—in terms of cash flow. For a company continuing in business and expanding, there is no real problem.

Mr. Mitchell: On a point of order, Mr. Speaker. I beg to give notice that I intend to raise the matter on the Adjournment, in view of the unsatisfactory nature of the reply.

Inflation

Mr. Skinner: asked the Chancellor of the Exchequer whether he is satisfied with the current rate of inflation; and if he will make a statement.

Mr. Healey: I refer my hon. Friend to the reply given to his Question on 8th July.

Mr. Skinner: I think my right hon. Friend said then that he was not terribly satisfied and that he hoped for something better—roughly speaking, that is. Does he not agree that his optimistic forecasts on that occasion have gone somewhat astray and that it is almost bordering on madness to allow an extra £1,000 million of price relaxation when the

Treasury is forecasting that profits will be up by about 30 per cent. compared with last year? Does my right hon. Friend agree with the Henley forecast in the past few days that inflation will still be over 10 per cent. by the end of 1977 and that wages will have little to do with it?

Mr. Healey: I am disturbed by the evidence that my hon. Friend's memory has become defective. My answer on 8th July bore no relation to what he appeared to remember of it, as he will discover if he refreshes his memory.
The rate of inflation has been falling steadily. On the last monthly figures, it was only 50 per cent. above the OECD average [Interruption.]—we still have some way to go—whereas a year ago it was 200 per cent. above the OECD average. I do not think that any hon. Member, including my hon. Friend, would deny that this astonishing improvement in our inflationary prospects is largely due to the common sense of the trade union movement—reinforced by recent decisions of the NUR and UCATT, which I hope my hon. Friend welcomes as much as I do—giving a 20-to-1 majority at the recent TUC congress for the 4½ per cent. pay limit which we negotiated some time ago. As regards the Henley forecast, no, I do not agree with it, nor does anybody who has attempted to forecast inflation.

Mr. Alexander Fletcher: Will the right hon. Gentleman in his complacency acknowledge, having inherited a rate of inflation of 9 per cent. in 1974 and having by his policies allowed that almost to treble, that bonfires should be lit throughout Britain if he ever succeeds in getting the rate back to a single figure?

Mr. Healey: I hope that the hon. Gentleman will join me in lighting the bonfire. I can think of some suitable fodder for it. The hon. Gentleman referred to my complacency. Believe me, the only time when I am ever tempted into that vice is when I contemplate the Opposition Front Bench.

Mr. Heffer: Does my right hon. Friend accept that part of the pay deal argument was that unemployment should be kept down? Is it true that extra unemployment of 70,000 as a result of proposed cuts was actually discussed with


the TUC yesterday morning? If that is true, how does my right hon. Friend square it with previous statements?

Mr. Healey: In discussions with the TUC last year and this year I have made it clear that the pay policies which I have put to it, which it has accepted, would ensure that unemployment would be a good deal lower than would otherwise be the case. That point has been made many times by Mr. Hugh Scanlon on television and elsewhere. I must remind my hon. Friend that a year ago many of the Government's critics were predicting that in June of this year there would be 2 million unemployed. As you know, Mr. Speaker, it is barely above 1¼ million. It is true that public expenditure cuts in 1977–78 mean that the fall in unemployment will be less than it would otherwise have been, but unemployment is likely to fall in the next few months. Indeed, it will have been falling for at least 18 months by the time the full employment effect of any public expenditure cuts is felt.

Sir J. Langford-Holt: To return to the rate of inflation from unemployment, will the right hon. Gentleman tell us when the rate of inflation last stood at 8·4 per cent.?

Mr. Healey: Yes. On the three-monthly figure it was 8·4 per cent. in October 1974, as Opposition Members often remind me.

Trade Union Officials

Mr. Ridley: asked the Chancellor of the Exchequer, if the rates of the private house of a trade union official are paid by the union, whether that sum is assessed against him for computing his income tax liability.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): Yes, Sir.

Mr. Ridley: Will the Financial Secretary permit himself a wry little smile at the fact that his review of benefits in kind and expense account brackets has ended up with the sole result that it is the trade union leaders who are getting away with it and no one else, not even business men?

Mr. Sheldon: The position is that even before the present proposals are implemented such payments are taxable.

They will remain taxable after the Finance Bill is passed.

Wealth Tax

Mr. George Rodgers: asked the Chancellor of the Exchequer what representations he has received to date in relation to the introduction of a tax on wealth.

Mr. Joel Barnett: Since the Green Paper setting out our proposals for a wealth tax was published in August 1974, I have received a number of representations about various aspects of the tax.

Mr. Rodgers: My right hon. Friend is no doubt aware of the representations contained in the Labour Party manifesto. Does he agree that the distribution of wealth in this country is very much out of balance and that the possession of wealth is not related to either merit or justice? Will he introduce a wealth tax as an urgent priority to meet this situation?

Mr. Barnett: Yes, I am happy to assure my hon. Friend that the Government remain firmly committed to the principle of a wealth tax.

Mr. Peter Bottomley: Does the right hon. Gentleman recognise that, although we do not have a formal wealth tax, the rate of inflation is an informal one? If when the present Government came into office a working person had retired with savings of £1,000 invested in a building society, what would be the real value of those savings now? If the hon. Gentleman does not have the figures to hand, will he arrange to make the calculation and publish the figure?

Mr. Barnett: If the hon. Gentleman cares to put down such a Question, I shall be happy to do just that.

Social Wage

Mr. Andrew F. Bennett: asked the Chancellor of the Exchequer what the value of the social wage is to a family of two adults and two children, under 11 years of age, with an income close to the national average for the most recent date for which figures are available; and how this compares with figures for February 1974.

Mr. Robert Sheldon: As I said in answer to a similar Question from my


hon. Friend yesterday, the social wage amounted to about £1,275 per member of the working population of 1975–76—that is, about £25 per week. The corresponding figures for 1973–74 and 1974–75 were £14·50 and £20 per week respectively. No estimates are available of the value of the social wage to particular types of household.
I would, however, refer my hon. Friend to the Central Statistical Office estimates of the distribution of taxes and benefits between households. The most recent were published in Economic Trends of February and refer to 1974.

Mr. Bennett: I thank my hon. Friend for that reply. Does he agree that in announcing any changes in public expenditure for next year it will be important to publish the effect of those changes on the social wage and, if possible, for a typical family household?

Mr. Sheldon: I shall be happy to do so.

Mr. D. E. Thomas: Will the hon. Gentleman give us an asurance that his Department will reconsider the remarks made by his right hon. Friend the Chancellor of the Exchequer on the social wage in his Budget speech, in which he argued that the social wage had increased at a far higher rate than the wage from employment? Does he realise that the social wage is paid to the majority of the population who are not earning—namely, the unemployed, the sick and the elderly?

Mr. Sheldon: I accept that the social wage is an aspect of the income of each member of the community that has to be considered. This is part of the consideration of public expenditure that is now taking place.

Mr. Nott: Would not everyone prefer to have lower taxation and a lower social wage? Presumably that is why the Chancellor intends to cut public expenditure further—that is, because he feels that people would rather have more choice about how they spend their money than have the Government choose for them.

Mr. Sheldon: We well understand the opposition of Conservative Members to the services that benefit large sections of the community who are utterly depen-

dent upon them. If it is proved necessary to bring about the changes that have been suggested, that will be agreed only with reluctance and only for the economic results that we shall be urgently requiring.

Education Expenditure

Mr. Luce: asked the Chancellor of the Exchequer what representations he has received regarding expenditure cuts in education.

Mr. Joel Barnett: None, Sir.

Mr. Luce: Does the right hon. Gentleman agree that education is one of the areas in which the catalyst of public expenditure should be used to obtain a more imaginative balance of priorities? For example, in his discussion with the Secretary of State for Education and Science will he bear in mind that a marginal reduction of only £50 million in the total subsidy of £362 million for school meals would enable him to contain public expenditure and make it possible to employ all the jobless teachers?

Mr. Barnett: I find that question surprising. The hon. Gentleman was saying that we should cut the school meals subsidy by £50 million and spend that sum on additional expenditure in education.
I thought that the view of the Opposition was that we should cut expenditure, full stop, and that we should not increase public expenditure anywhere. I see the hon. Member for Oswestry (Mr. Biffen) nodding in agreement with that description of the Opposition's view. That tends to put the hon. Gentleman in a rather different position from that of his Front Bench.

Mr. Cryer: Will my right hon. Friend accept that the view adopted by the Tory Party, aimed at taking the food out of children's mouths, is not the best kind of policy when considering public expenditure cuts? Does he agree that Labour Members would like to see him and his Government colleagues have their head on defence matters and recoup £1,000 million in defence expenditure so that education, which has a high priority in the trade union and labour movement, especially in deprived areas such as Yorkshire and Humberside, is maintained and improved and so that we may reduce class sizes rather than increase them?

Mr. Barnett: As my hon. Friend will be aware, one or two discussions are at present taking place on priorities in our public expenditure programme. I have noted his view on the defence programme and shall bear in mind everything he has said.

Borrowing Requirement

Mr Peter Morrison: asked the Chancellor of the Exchequer how he intends to fund the public sector borrowing requirement for the present financial year.

Mr. Joel Barnett: It is not the practice to provide forecasts of the financing of the public sector borrowing requirement. My right hon. Friend the Chancellor of the Exchequer has recently emphasised his objective of financing a high proportion of the borrowing requirement by sales of gilts outside the banking system.

Mr. Morrison: Is the right hon. Gentleman satisfied that this year's borrowing requirement can be funded without any detrimental effect on the rate of inflation or on industry?

Mr. Barnett: Yes, Sir.

Mr. Wrigglesworth: What will be the implications for interest rates and money supply if the public sector borrowing requirement is left at its present level in the coming two years?

Mr. Barnett: There will be a serious problem in the next few years if borrowing remains at a very high level. [HON. MEMBERS: "Hear, hear."] I am glad to have the support of the Opposition, and, indeed, of anybody else who understands that the Government's broad aim is to ensure that our industrial strategy succeeds. That means that the maximum amount of resources should be made available for industry.

Mr. David Howell: The Chancellor of the Exchequer was reported yesterday as having said that cuts in public spending and reduced borrowing were necessary to stop another slide in sterling. Can the Chief Secretary say how much of the $5,000 million standby credit has been drawn in the meantime?

Mr. Barnett: No, Sir.

Mortgage Interest Relief

Mr Frank Allaun: asked the Chancellor of the Exchequer what is the annual and total tax relief, respectively, on a 100 per cent. mortgage on the average priced house of £9,090 bought over 25 years at present interest rates, compared with those reliefs on such a mortgage on a house costing £25,000, and the approximate annual saving if such tax relief were limited to the standard rate and mortgage ceilings were reduced to £9,090.

Mr. Robert Sheldon: With permission, as the answer is somewhat lengthy, I shall arrange for it to be circulated in the Official Report.

Mr. Allaun: Would not these two proposals save the Government about £160 million a year without hurting the average-income purchaser of an ordinary house, although the ceiling in London would have to be higher? Secondly, would not this be much fairer than to slash council house subsidies, which would be bound to mean a further increase in rents and a reduction in house building?

Mr. Sheldon: I understand the point made by my hon. Friend, but they are largely matters for my right hon. Friend the Secretary of State for the Environment. My hon. Friend will know that the housing finance review will be ready in the autumn. The financial implications of the matters to which he refers will need to be considered carefully in the light of that review. We know his interest in these matters, and we shall continue to watch over them as best we can.

Mr. Michael Latham: Will the hon. Gentleman confirm that, however one does the sums, it still costs three times as much to house a person in a new council house as to help him buy his own home?

Mr. Sheldon: The hon. Gentleman uses his figures glibly. I am unable to confirm or deny the figures at the moment. But the way in which housing finance has developed over the years and the amount of money provided by the Chancellor in the way of subsidies of one kind or another have led to the urgent need for a review, and we await the report with great interest.

Following is the answer:
The tax relief depends on the rate of interest, the levels of tax rates and allowances, and the amount and composition of the mortgagors income.
The relief in the first year, at the present basic rate of tax and a mortgage interest rate of 10½ per cent., would be approximately £37 per £1,000 of mortgage in each case. Assuming that the interest rate continued at 10½ per cent. and that the payments attracted relief at the 1976–77 basic rate of tax throughout the period of the mortgage, total tax relief would be approximately £650 per £1,000 of mortgage in each case. If relief was limited to a mortgage ceiling of £9,090, the reduction in tax relief at the basic rate of tax would be £589 in the first year and, on the assumptions given above, £10,342 over the whole period. The effect of limiting relief to the basic rate of tax will depend on the taxpayer's original rate of tax.

Interest Rates

Mr. Teddy Taylor: asked the Chancellor of the Exchequer if he will make a statement on his policy on interest rates.

Mr. Robert Sheldon: The Government's policy is to keep interest rates at as low a level as is compatible with the external position and the need to finance the public sector borrowing requirement.

Mr. Taylor: Does the Minister think that mortgage rates are likely to go up? If he does not know the answer, will he say whether it is Government policy to seek to avoid their going up?

Mr. Sheldon: It is the Government's policy to keep interest rates as low as possible consistent with the twin objectives of attracting money to pay for the borrowing incurred overseas as a result of our overseas deficit and also to retain as low a rate as possible for the expansion of industry.

Mr. Watkinson: Does my hon. Friend accept that it is now time to give serious consideration to a two-tier system of interest rates so that the expansion of industry at home is not hindered by the need to attract funds from abroad at high interest rates?

Mr. Sheldon: My hon. Friend will know that I and many others are much attracted to a scheme of two-tier interest rates. The difficulty is that with the sophisticated markets that operate in this country there would be bound to be considerable leakage from one tier to the

other. That would make such a policy unworkable.

Mr. Wigley: Does the Minister foresee that in the next decade interest rates will fall to the level that was common in the 1950s and 1960s? If so, what steps does he believe need to be taken to attain that objective?

Mr. Sheldon: I find the forecasting of interest rates one of the hardest problems before me. As for estimates into the next decade, I am sorry that I am unable to help the hon. Gentleman.

Mr. Nott: Is the Minister aware that the interest rate differential between London and New York is now 5 per cent.? He said that the Chancellor was keeping interest rates as low as possible compatible with the need to attract foreign funds. A difference of as much as 5 per cent. is surely high. Given the Financial Secretary's answer, why is it necessary?

Mr. Sheldon: The day-to-day management of these matters takes into account the demand and supply of funds generally. This is the estimate at present. These matters vary, and they will vary in the coming months.

Industrial Investment

Mr. Loyden: asked the Chancellor of the Exchequer what fiscal methods he will use to direct the resources made available by public expenditure cuts into manufacturing industries.

Mr. Ron Thomas: asked the Chancellor of the Exchequer what evidence he has to suggest that the resources released by the recent public expenditure decisions will find their way into exports and capital investment.

Mr. Healey: As I told the House on 6th July, manufacturing output and exports are already responding better than I had hoped at the time of my Budget speech three months ago.
Our fiscal policy, our policy on public spending, as spelt out in the February White Paper, Cmnd. 6393, my April Budget and the voluntary restraint on incomes, will ensure that these increases in national output are not appropriated for consumption, whether public or private. If they were, there would be no chance whatever of the flow of funds


into manufacturing industries of which my hon. Friend speaks. How much of these resources will be taken up in private-sector investment depends on decisions in industry, influenced by the better prospects I have outlined. All the evidence is that there will be a substantial increase in manufacturing investment over the next 12 months. But I am ready to take whatever further steps may appear necessary to sustain investment.

Mr. Loyden: Does my right hon. Friend agree that the whole question of the social contract rests on the recovery of the British economy and the regeneration of British industry? Therefore, any question of resources being made available by further sacrifices on behalf of the working class may not mean that such resources will go towards the aims envisaged by the Government. Does my right hon. Friend also agree that the only possibility of ensuring that these resources are directed in the right way lies in the co-ordination of our economy and the giving of a firm role to the National Enterprise Board? Is not the trade union movement making sacrifices, and is it not a fact—

Mr. Speaker: Order. Long supplementary questions only limit the length of time available for other hon. Members.

Mr. Healey: I very much support the view of my hon. Friend that the regeneration of British industry is the objective that the trade union movement and the Labour Government have in common. My hon. Friend will have seen that Lord Watkinson, greatly to the chagrin of his ex-colleagues on the Opposition Front Bench, recently gave wholehearted endorsement to the Government's industrial strategy and undertook to talk to the leading 100 companies and to exert his influence on behalf of the CBI to see that investment was speeded up.

Mr. Lawson: Will the right hon. Gentleman confirm that the public expenditure cuts which he is planning for 1977–78 would be absolutely essential even if there were no external pressure whatever on sterling? Is it not the case that, for precisely the same reasons, further cuts will be needed in subsequent years?

Mr. Healey: On the first part of the question, I believe that some reduction

in public spending next year is necessary in order to accommodate the expected acceleration of manufacturing output and gross domestic product to which I referred last week. As to future years I do not think that that will be required, but the profile of public expenditure needs to be changed in the light of the latest information about the speed with which the economy is recovering and our industrial policy is succeeding.

Mr. Thomas: Is my right hon. Friend aware that it confuses the issue when he switches from monetary to physical resources? What is the mechanism within the capitalist system which switches real economic resources away from education, the social services, and hospitals and into exports and capital investment? The fact is that there is no mechanism. Under the Price Code recently we saw £200 million to £300 million again diverted away from the consumer into increased prices. Does not the reaction of the Government—[Interruption.]

Mr. Speaker: Order. The hon. Gentleman is only cutting out two of his hon. Friends who would otherwise have been called.

Mr. Healey: I was unable to hear the last part of my hon. Friend's supplementary question, but I will answer the first part. In the past, too little attention has been given to financing economic activities as against actual resource flows. If my hon. Friend is asking about the mechanism which ensures that the resources flow increases with the wishes or desires of the Government, this depends very largely on the fiscal policy followed by the Government. In the 11 years since 1964, the increase in local authority manpower was 700,000 and the reduction in manpower in manufacturing industry was about 1 million. There is no reason why there should not be a reverse flow, provided that we give the necessary incentive to manufacturing industry.

Sir G. Howe: Does not the Chancellor recognise that if that incentive is to come into existence he must be prepared to accept the advice of Lord Watkinson and others to make a more substantial relaxation in the Price Code, and take further action on the public sector borrowing requirement if interest rates are to come down to a sensible level which makes investment possible?

Mr. Healey: I take very seriously the views of representatives of important groups in the economy, such as the trade unions and industrialists, but if I accepted all the advice given to me I would be carrying out contradictory policies in all fields. The recent relaxations in the Price Code were necessary and will be sufficient to enable manufacturing industry to rebuild its liquidity. With the tax reliefs already offered, this should help the upturn in the economy. That is the overwhelming view of the majority of British industry. Otherwise, we should not have seen the very large increase in declarations of intention to invest which was shown in recent surveys carried out by the CBI, the Department of Industry and the Financial Times.

Bank of England (Governor)

Mr. Hoyle: asked the Chancellor of the Exchequer when he next plans to meet the Governor of the Bank of England.

Mr. Joel Barnett: My right hon. Friend meets the Governor of the Bank of England frequently.

Mr. Hoyle: Knowing my right hon. Friend's desire for good relations with the TUC, may I ask him, next time he meets the Governor of the Bank of England, to discuss why a publicly-owned corporation is backing a "sweetheart" union—a staff association—at the expense of a TUC affiliate? Will he ensure that this courtship is broken off and that the TUC affiliate is granted the same facilities? If he wishes, I shall send him papers on this matter.

Mr. Barnett: I am happy to receive papers from my hon. Friend at any time. I note what he has said with a view to considering the matter when we have further discussions with the Governor.

Mr. Michael Marshall: Will the Chief Secretary ensure that when the Chancellor next meets the Governor he will say that he intends to resist the advice of his hon. Friends below the Gangway who are in favour of the nationalisation of banks? This is against the view of the vast majority of those who work in banks and of foreign investors and against the wholehearted views of the majority of the British people.

Mr. Barnett: I do not claim to speak, as the hon. Gentleman does, for the wholehearted view of the majority of people in this country. However, the Government have no plans to nationalise any company in the banking sector.

MINISTERIAL BROADCASTS

Mr. Peter Morrison: asked the Prime Minister when he next intends to make a ministerial broadcast.

The Prime Minister (Mr. James Callaghan): I refer the hon. Member to the reply which I gave to the hon. Member for Blaby (Mr. Lawson) on 27th April.

Mr. Morrison: When the Prime Minister makes a ministerial broadcast will he explain to the nation which Bills he intends to drop this Session as a result of the muddle brought about by the Leader of the House?

The Prime Minister: By the time I make my next ministerial broadcast those Bills will be well on the way through the House, so I shall not need to refer to them.

Mr. MacFarquhar: When my right hon. Friend makes his broadcast, will he make a more forthright reply to the Leader of the Opposition and tell her that if she is anxious to recommend the right hon. Member for Sidcup (Mr. Heath) as one of the two Commissioners in Brussels he will give that suggestion earnest consideration?

The Prime Minister: I do not wish to make any mischief between Members of the Opposition. I have enough troubles of my own. Of course, I shall consider any suggestions that the right hon. Lady may wish to put to me in that regard, but having looked at the precedents since yesterday I find that on the last occasion an appointment of this sort was made it was made without any consultation with the Leader of the Opposition at the time.

Mr. Nicholas Winterton: When the Prime Minister next broadcasts to the nation, will he mention the position of British citizens—business men and missionaries—in Uganda? Their safety is of paramount concern to the people of this country. Will he tell the House what representations he has made to the


President of Uganda and what representations have been made by other international bodies, such as the EEC, the United Nations and the Organisation of African Unity, about the safety of British citizens?

The Prime Minister: I have some personal experience of this matter, because a year ago I found to my astonishment that when I went to the High Commissioner's house 350 British citizens had assembled there at 24 hours' notice. I mingled with them and talked to them about their position, and I judge from that conversation that most of them are long-serving residents of Uganda who know the risks they are running. It is for them to assess those risks. Some will leave Uganda. Others will never leave, because they regard Uganda as their home. The time has come when I would say to British citizens "You know the risks, you know the limitations on our capacity to assist you when you are dispersed throughout the country. Please assess those risks as much as you can and take your own decision."
What has happened in Uganda in recent days does not lead me to believe that any representations by me to President Amin would have any effect. I expect him to account for the death of Mrs. Bloch. It is right that he should carry out what he said to our High Commissioner when he was there. Every nation has the right to ask that the fate of one of its citizens should be known to the home country, in this case either Israel or ourselves. I do not regard President Amin as having carried out that obligation yet.

Mr. Greville Janner: Will my right hon. Friend also ask for a full inquiry from President Amin and, if possible, the return of the remains of Mrs. Bloch's body to her family?

The Prime Minister: I do not propose at this stage to communicate with President Amin. We have a representative in Uganda, and he should make such representations as are necessary in these matters.

Mr. Fairbairn: In considering the fate of citizens who are arrested in Uganda, will the Prime Minister take steps, with other members of the Commonwealth, to ensure the safety and to discover the fate

of Kenyan citizens who may have been massacred by the Ugandan authorities as an act of spite?

The Prime Minister: Relations between Uganda and Kenya have been getting more difficult as the days have passed. I think that Kenya has been subjected to an unjustifiable campaign. I hope that in so far as we can give assistance to Kenyan citizens who need help we shall do so, but on balance I think that the Kenyan Government are best able to do that.

Mr. Canavan: asked the Prime Minister how many ministerial broadcasts he has made in the last month.

The Prime Minister: None.

Mr. Canavan: In view of the annual estimate of at least £300 million of unclaimed supplementary benefit, will my right hon. Friend make a broadcast encouraging needy people to claim for benefits to which they are entitled? In view of the scurrilous, unsubstantiated allegations that 20 per cent. of claims are fraudulent and that half the unemployed are scroungers, and bearing in mind the estimate of at least £500 million annually which is stolen by rich tax evaders, would not that be a more worthwhile cause to be pursued by cheap Right-wing sensationalists, such as the Sproats and Knights of this world?

The Prime Minister: Inquiries have shown that a number of genuine claimants who should receive their entitlement do not do so. It would be a misfortune if those who genuinely need assistance were to be deterred from claiming it because of the activities of a swindler who has rightly been convicted and given a heavy sentence. We all know from our constituencies how our own people, in many cases honest, decent and hardworking, deeply resent the abuses that take place, but I invite the House to keep this matter in proportion in relation to the benefits that the House has agreed that those in need should draw and not be driven into accepting a situation in which decent, honourable people are discouraged from making their claims.

Mr. David Steel: Since the cuts in public expenditure that the Government are now planning are bound to affect many Government Departments, will the


Prime Minister undertake to make a broadcast explaining them to the country and not leave that to the Chancellor of the Exchequer? When may we expect that broadcast to take place?

The Prime Minister: The decision on whether the broadcast should be made by the Chancellor or myself can be left for a little later. As for when we shall make the decision, I cannot go further than I have in response to previous questions by the Leader of the Opposition, namely, that it would be very convenient if we could reach a conclusion on this matter and inform the House before we rise for the recess.

Mr. Ioan Evans: Is my right hon. Friend aware that if he makes a ministerial broadcast it will give the Leader of the Opposition the right of reply? Is he further aware that if the right hon. Lady took that right we could then try to discover why the Opposition are calling for increased public expenditure in numerous ways, and especially for a heavy increase in defence spending, but are saying that we should cut it back in general?

The Prime Minister: I had not thought of that advantage in making my broadcast. My hon. Friend has certainly encouraged me to make it.

Mr. McCrindle: Will the Prime Minister consider making a broadcast that will make absolutely clear the position of the Government on the one hand and the Labour Party on the other about the nationalisation of the "big four" banks and the "big seven" insurance companies? Will he make an estimate of the effect on the balance of payments if invisible earnings from both those sources were to dry up?

The Prime Minister: No, I do not think that I shall make a broadcast on that matter. We are capable of settling it ourselves.

TUC

Mr. Skinner: asked the Prime Minister whether he intends to attend the TUC in September.

The Prime Minister: I do not plan to do so.

Mr. Skinner: When my right hon. Friend met the TUC yesterday, did he detect a certain reluctance by a large majority of its members to accept the current public expenditure cuts? Is not that to be expected when only three years ago just about the only advocate in this House, and possibly outside it, for cutting public expenditure was the right hon. Member for Down, South (Mr. Powell)? Is my right hon. Friend aware that even at that time the right hon. Gentleman was attacked by the Deputy Leader of the Opposition, who said, in a speech at Berwick on 7th November 1973, that inflation could not be got under control by cutting public expenditure? Is this not a strange road for the trade union and Labour movement to travel at this time?

The Prime Minister: I found as much reluctance among the TUC Economic Committee as my right hon. Friend the Chancellor and I feel in putting forward the proposals. No one should assume—and I am sure that my hon. Friend the Member for Bolsover (Mr. Skinner) does not—that there is some masochistic pleasure to be secured in this. My hon. Friend made a significant point about the position three years ago. In the last three years public expenditure, in real terms, has increased by 20 per cent. while our gross domestic product has increased by only 2 per cent. Therefore, a speech that might have appeared totally unjustified three years ago might prompt different conclusions if made now.

Mr. Tim Renton: The Prime Minister is widely reported as having told the trade union leaders yesterday that public expenditure cuts are vital if he is to stay in office. Is that true? Did he say that? If he did, when will he make clear to his hon. Friends below the Gangway and the country at large this connection between public expenditure cuts and his job?

The Prime Minister: I assure the hon. Member that it is not so much a matter of my personal position; it is much more the case that I believe very strongly that only a Labour Government can at present carry this country through the economic circumstances that demand a difficult combination of asking the trade unions for sacrifices from their members at the same


time as we are restraining public expenditure, and getting a unique agreement from the CBI to encourage manufacturing industry. I believe that the Labour Government are the Government who can carry this through, and it is in that sense that I wish them to stay in office.

Mr. Hooley: When my right hon. Friend next meets the TUC, will he put to it the possibility that substantial increases in taxation on alcohol, gambling and tobacco, which would reduce the borrowing requirement, would be a more acceptable policy than cutting expenditure and, as a result, increasing unemployment, by 70,000?

The Prime Minister: I would prefer not to be drawn into details on these matters at this time. They are more questions for my right hon. Friend the Chancellor, who has just endured 45 minutes of them.

Mr. Ian Lloyd: As the Prime Minister, in some interesting recent speeches, has invited investors and the CBI, as well as the TUC, to co-operate with the Labour Government, will he explain to the TUC and the country how the co-operation of investors can possibly be secured in the light of answers I received from the Chancellor today, which showed that at any rate of income and at any rate of investment the total return is negative?

The Prime Minister: That shows the absolute necessity of the Government continuing their policy to overcome inflation, on which there has been very great success in the last 12 months, with a reduction from about 27 per cent.—

Mr. Grylls: Who put it there?

The Prime Minister: If we are to go into the reasons for the rate of inflation being there, I shall give the answer in two words—Lord Barber.
To come back to the question, it is clear that if manufacturing industry is to invest it must be assured, after inflation, of a reasonable return on the investment. That is a basic lesson, whether one lives in a capitalist society, a mixed economy

or a totally Socialist economy. All economies discover the same thing in the end.

Mr. John Mendelson: Whether my right hon. Friend does or does not attend this year's TUC conference, his Administration has always attached the greatest importance to relations with the TUC and has derived great strength from that relationship. Is it not clear, therefore that any policy which, instead of reducing unemployment greatly by the end of this year, adds to the number of unemployed is bound to create serious problems between the Government and the trade union movement? Is my right hon. Friend aware that there are many supporters of the Government who will find it difficult to support such a course?

The Prime Minister: Yes, Sir, I understand all these matters—at least, I hope I do. I have always based our policy, as indeed did my predecessor, upon close co-operation with the TUC. That is why I am engaged with the Chancellor of the Exchequer, in consultation with others, in the perhaps unprecedented task of discussing these problems with the TUC. I do not wish to embroil the TUC in what must be Government decisions, but I want to make sure that the TUC understands whatever measures are taken, so that the social contract can continue and the basis upon which Britain's recovery can be achieved will not be destroyed.

Mrs. Thatcher: If the Prime Minister believes the economic diagnosis he gave in his answer to my hon. Friend the Member for Havant and Waterloo (Mr. Lloyd), why did his Chancellor of the Exchequer, in the last General Election, boast that he had already got inflation down to 8·4 per cent?

Hon. Members: Answer.

The Prime Minister: If I am given an opportunity, I shall do so. My right hon. Friend gave the figures for the previous quarter. Those figures have never been disproved. Statistically and arithmetically they were right, but unfortunately, when extrapolated, the trend did not continue.

BUSINESS OF THE HOUSE

Mrs. Thatcher: May I ask the Leader of the House to state the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): The business for next week will be as follows:

MONDAY 19TH JULY—Completion of the remaining stages of the Finance Bill, until about 7 o'clock.

Motion on EEC Document on the 1977 Preliminary Draft Budget No. R/1483/ 76, together with R /373/76, R/672/76, R/794/76, R/1117/76, R/1370/75, R/118/76, R/1290/76 and R/1291/76.

Motions on financial assistance to Kearney and Trecker Marwin Ltd. and the Hill Livestock (Compensatory Allowances) Regulations.

TUESDAY 20TH JULY—Consideration of three timetable motions on the following Bills: Aircraft and Shipbuilding Industries, Dock Work Regulation, Education, Health Services and Rent (Agriculture) [HON. MEMBERS: "No."]

Mr. Speaker: Order. I suggest that we hear what else is in store. Questions can follow afterwards.

Mr. Foot: The remaining business is:
WEDNESDAY 21ST JULY—Remaining stages of the Education Bill.
THURSDAY 22ND JULY—Remaining stages of the Rent (Agriculture) Bill.
FRIDAY 23RD JULY—Remaining stages of the Parliamentary and Other Pensions and Salaries Bill, the Junior Ministers and Other Salaries Order, and the motion on Members' pay, etc.
Motions on Northern Ireland Orders on Financial Provisions, Appropriation (No. 2), Pharmacy, Poisons and the Department of the Civil Service.
MONDAY 26TH JULY—Remaining stages of the Dock Work Regulation Bill.
The House, Mr. Speaker, will wish to know that, subject to progress of business, it is hoped to propose that the House should rise for the Summer Adjournment on Friday 6th August.

Mrs. Thatcher: I refer to Tuesday's business. Will the Leader of the House confirm that never before has a Leader of the House of Commons proposed to guillotine five major Bills in one day? He has shown a contempt of Parliament unprecedented in our whole history. Is the Leader of the House aware that in those circumstances I feel sure that my hon. and right hon. Friends will not wish to pair, least of all to allow Ministers to represent this dictatorial Government overseas? Our place will be here to defend a Parliament in danger from guilty men. Is the right hon. Gentleman aware that if he proceeds with these proposals the epitaph of the Government will be—[Interruption.]

Mr. Speaker: Order. The Leader of the Opposition is entitled to be heard.

Mrs. Thatcher: Is the right hon. Gentleman aware that if he persists with these proposals the epitaph of the Government will be "The Government that brought the Iron Curtain down on the Mother of Parliaments"?

Mr. Foot: Mr. Foot rose—

Hon. Members: Out.

Mr. Speaker: Order. We shall not advance the interests of the House by making a noise. There is all the more reason for self-control when there are high feelings. [HON. MEMBERS: "Reichstag."] It will become the Reichstag if we do not allow free expression from both sides. [Interruption.] I ask the House, not for the first time, to listen. Hon. Members may not want to hear but I ask them to listen and then I shall call hon. Members from either side.

Mr. Lawson: On a point of order, Mr. Speaker. Is not the only Standing Order of the House that enables a timetable motion to be moved Standing Order No. 44? Does not that Standing Order make it clear that the proceedings may apply to only one Bill?

Mr. Speaker: The answer is in the negative.

Mr. Foot: Perhaps I could adopt your language, Mr. Speaker, and say that the answer to the right hon. Lady is in the negative. It is perfectly true, to reply to the questions put by the right hon. Lady, to say that the same number of


guillotine motions have not been proposed on a single day. It is the fact that previous Governments have introduced the same number of guillotine motions as we are proposing in a whole Session. We are proposing those motions under Standing Order No. 44, as the hon. Member for Blaby (Mr. Lawson) said, which was introduced into the House in November 1971 by the Conservatives. There are full precedents for what we are doing. So far from curtailing free speech, as compared with what was done by the right hon. Lady and her colleagues when in Government, we have allowed much more time.

Mr. Prior: What about the Dock Work Regulation Bill?

Mr. Foot: We have allowed much more time on the Dock Work Regulation Bill than was allowed—

Mr. Prior: How much?

Mr. Foot: Thirty-six days on the Committee proceedings.

Mr. Prior: No. On the Floor of the House.

Mr. Foot: On the Dock Work Regulation Bill, the Aircraft and Shipbuilding Industries Bill and the Education Bill far more time has been allowed in Committee than on most of the Bills guillotined by the Conservatives. We repudiate entirely the charges of the right hon. Lady. What we say is that a Labour Government have as much right to resort to these parliamentary instruments as a Conservative Government, especially when we have allowed much more time for discussion during the Committee stage of these Bills.

Mr. Thorpe: On a point of order, Mr. Speaker. It will be within your recollection that under Standing Order No. 44 when a timetable motion is tabled with respect to any Bill Mr. Speaker will allow not more than three hours' debate. We are being asked, apparently, to consider five motions—[HON. MEMBERS: "Three."] With respect we are being asked to deal with five separate Bills. The fact that the Government choose to depart from the normal practice and try to bunch them in three motions is another matter. It is no use the Leader of the House shaking his head. Are we to assume that the House is being asked to give three hours to each Bill so that there will be

15 hours' debate? If not I would ask you to rule that the matter is entirely out of order.

Mr. Foot: I think that you have already ruled on the first matter whether Standing Order No. 44 could encompass more than one Bill, Mr. Speaker. We checked this carefully and the ruling we received is the same as that which you gave a few minutes ago.

Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker—

Mr. Speaker: Order. The Lord President is on a point of order. [Interruption.] Let us do things in an orderly way. The right hon. Member for Devon, North (Mr. Thorpe) rose on a point of order. Even if the Lord President omitted to say "Further to that point of order", he was dealing with the point. I shall call the hon. Member for Tiverton (Mr. Maxwell-Hyslop) immediately after this point of order.

Mr. Maxwell-Hyslop: Further to that point of order—

Mr. Speaker: Order. I can tell the House, in reply to the question raised by the right. hon. Member for Devon, North, that I shall look at the motions when they are tabled on Monday. Obviously I cannot rule today. I must wait until I see what is on the Order Paper.

Mr. Foot: To deal with the question asked by the right hon. Member for Devon, North (Mr. Thorpe), we are acting strictly under Standing Order No. 44, as you have indicated, Mr. Speaker. Therefore we are fully entitled to couple two Bills in a single motion.

Mr. Maxwell-Hyslop: No.

Mr. Foot: The hon. Member says "No". Mr. Speaker has ruled—

Mr. Maxwell-Hyslop: No, he has not.

Mr. Foot: I can assure Conservative Members, before they get excited, that we have taken every step to ensure that we are acting strictly within the rules. I am sure that when Mr. Speaker confirms what I am saying the whole House will abide by his ruling. May I say to the right hon. Member for Devon, North, who apparently complains that we are acting in a manner which is in some sense out of order or not in accordance


with precedent, that there have been occasions—

Mr. Beith: That is no excuse.

Mr. Foot: —under previous Governments when there have been five guillotine motions introduced in a single Session.

Mrs. Kellett-Bowman: When?

Mr. Foot: That happened in 1962 under the Conservative Government. No doubt they were taking into account a further precedent from the Liberal Party which had done the same thing in 1908.

Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. If I may suggest a novelty, it would be that Mr. Speaker replies to points of order and the Leader of the House replies to questions to the Leader of the House. It was because the Leader of the House was presuming to reply to a point of order raised by the right hon. Member for Devon, North (Mr. Thorpe) that I sought to catch your eye on a point of order. The Leader of the House had not risen on a point of order.
The point of order which I wish to put to you, further to the previous one, applies to the propriety of what the Leader of the House has suggested. I am directing this to you, Mr. Speaker, and not to the Leader of the House. The first occasion when there were two Bills subject to the same allocation of time motion was on 12th February 1908 when two days were given to an allocation of time motion on two synchronous Bills, the Small Landholders (Scotland) Bill and the Land Values (Scotland) Bill, both of which had been blocked by the House of Lords. These two Bills were part and parcel of each other. Both had been passed through this House and blocked by the House of Lords. Two days were allocated to that business.
The second occasion—

Mr. Speaker: Order. I am not seeking in any way to prevent the hon. Member from presenting his point of order—

Mr. Russell Kerr: Why not?

Mr. John Mendelson: This is business question time.

Mr. Speaker: Because it is the right of everyone in this House to raise such

matters. I request the hon. Gentleman, rather than giving me the history, which I will look up myself, to make his point of order, which I can consider in due course.

Mr. Maxwell-Hyslop: I will come to the next occasion when the House thought it right to consider a timetable motion on three Bills. Those three Bills were dissimilar. What they had in common was what all three had been passed in this House by a substantial majority, and all three had been thrown out by the House of Lords.

Mr. Speaker: I am much obliged to the hon. Gentleman for giving way. It appears to me that he is producing an argument which would be better advanced in the debate next week, if everything—[HON. MEMBERS: "No."] Order. I want the House to understand that I do not change my mind because hon. Members shout "No". I am not here to be intimidated in that way. [Interruption.] Order. The hon. Member for Tiverton (Mr. Maxwell-Hyslop), as the House knows, is well versed in points of order. I know that he will come to his point of order rather than make out the case which he will no doubt be able to advance next week.

Mr. Maxwell-Hyslop: The point of order—[Interruption.] The point of order—

Mr. William Hamilton: On a point of order—

Several hon. Members: Several hon. Members rose—

Mr. Speaker: Order. I can listen to only one point of order at a time.

Mr. Maxwell-Hyslop: The point of order—

Mr. William Hamilton: Mr. William Hamilton rose—

Mr. Speaker: Order. I am listening to the hon. Member for Tiverton at the moment.

Mr. Maxwell-Hyslop: I am grateful to you, Mr. Speaker. My point of order—and it is a point of order and not a point for a debate on a timetable allocation motion—is this: never before has the Chair been asked to put to the House a motion embodying allocation of time on more than one Bill, except when one or more of the following circumstances


have been present. The first is when the Bills put together in the timetable motion have been rejected or blocked by the House of Lords. The second is when the Bills are related to each other by their content. The reason I put this to you as a point of order, Mr. Speaker, is that I submit that it would be an abuse of the due process of this House if, pursuant to the announcement just made by the Leader of the House, you were next Tuesday to put to the House a motion which has no basis in precedent at all and which does violence to all the precedents.

Mr. Speaker: I am grateful to the hon. Gentleman for outlining his point of order. I shall, of course, in the very nature of things—even if the hon. Gentleman had not raised this point of order—look at all these matters very closely in due course.

Mr. Heffer: On a point of order, Mr. Speaker. Will you advise the House what can be done about a situation in which an hon. Member, who has raised points of order and procedural matters over about 12 years, and has been right on only one of them—[Interruption.] Can we have the protection of the Chair, Mr. Speaker, so that we shall not be subjected to boring points of order from an hon. Member who has been wrong on almost every occasion?

Mr. Speaker: Order. May I seek the co-operation of the House? I hope that we shall not have a series of points of order this afternoon. They develop into points of argument, and it is very unfair at this stage to involve me in the argument until I have given consideration to everything.

Mr. Thorpe: On a point of order, Mr. Speaker. If I heard the Leader of the House—[Interruption.] If it is still in order, Mr. Speaker, to raise a point of order without being shouted down, the Leader of the House, if I heard him correctly—I apologise if I did not—said that you, Mr. Speaker, had decided that this bunching of motions was perfectly in order. My recollection, Mr. Speaker, is that you indicated that you had come to no decision on that matter, and would took at it with an open mind and make your decision in accordance with Standing Order No. 44. Perhaps you would

confirm that that is the correct position and that it is not the position as advanced by the Leader of the House.

Mr. Speaker: As I understood the Leader of the House, he was indicating that he had consulted authorities.

Mr. Foot: May I say, Mr. Speaker, that we believe that we are acting properly under Standing Order No. 44. But we shall, of course, be fully eager and ready to abide by any decision you make on the application of Standing Order No. 44. It was certainly my understanding that that was the interpretation to be placed on your earlier intervention. But in any case, Mr. Speaker, it is, of course, for you to decide how Standing Order No. 44 should be applied. We are quite confident that we are acting within it, but we shall await your verdict on the matter.

Mr. Hordern: On a point of order, Mr. Speaker. Is not the point that the Leader of the House is trying to say that he sought advice from you, and that he had obtained that advice and, indeed, your approval? [HON. MEMBERS: "He did not say that."] Would you confirm that that is not the case?

Mr. Foot: These matters of the application of Standing Order No. 44, as I understand the position, were discussed when the Standing Order was introduced by a Conservative Administration, as I indicated before, in November 1971. I believe that the form of bunching that could take place was discussed then. But I repeat—I think it is right for me to do so—that if you say to the House, Mr. Speaker, that you will give your verdict on this matter and wish for time to consider it, we must await that verdict.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: What I indicated quite clearly to the hon. Member for Blaby (Mr. Lawson) was that more than one Bill can be included in the same motion. That is as far as I have gone.

Mr. F. P. Crowder: On a point of order, Mr. Speaker. Is the position that you will give your ruling under Standing Order No. 44 in due course, when you have considered the matter?

Mr. Speaker: That is right. Business Questions—Mr. Peyton.

Mr. Peyton: I want to ask the Leader of the House why it took him so long to come to this conclusion. The difficulty—

Mr. Ashton: It is none of your business.

Mr. Peyton: The difficulty is one of the right hon. Gentleman's own and his colleagues' creation and it is of some long standing. It would appear that the right hon. Gentleman—I should like to ask him about this—claims to have obtained a ruling as to the construction of Standing Order No. 44. Did he have difficulty in obtaining that ruling? Was that the reason for his long delay?
Finally, may I ask the right hon. Gentleman whether he is aware that today he has blown to pieces the last shreds of his reputation as a parliamentarian?

Mr. Foot: rose—

Hon. Members: Resign!

Mr. Speaker: Order. If the House will listen to the right hon. Gentleman's reply, we may make progress.

Mr. Foot: The timing of the proposal for these debates has had nothing to do with any delay about the interpretation of Standing Order No. 44. If there is any dispute about the cause of the difficulties that we have had in getting these measures through the House, and that is the question—the Aircraft and Shipbuilding Industries Bill, the Dock Work Regulation Bill, the Education Bill, the Health Services Bill, and so on—that of course is a matter to be debated when these motions are debated in the House on Tuesday, as has been the case on innumerable guillotine motions which have been presented to the House.
I do not accept any charge from the Conservative Party about the Government being opposed to the proper operation of Parliament because of the introduction of guillotine motions. Many more guillotine motions have been introduced into this House by Conservative Governments than by Labour Governments, and they have been introduced into this House after much shorter periods of discussion in Committee than have occurred on these Bills. For that reason, I believe that the storm of opposition today has been entirely synthetic. It could have been foreseen.
It is an absurdity for both Conservative and Liberal spokesmen, whose Governments have been responsible first for establishing the guillotine and then for introducing it on innunmerable occasions, to accuse us of interfering with free speech when we say that a Labour Government have as much right to get their business through the House as a Conservative Government.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: Order. I want the House to know the action that I propose to take. I propose to take a very limited number of business questions. I do not know whether the hon. Member for Birmingham, Handsworth (Mr. Lee) is still pressing his application under Standing Order No. 9.

Mr. John Lee: I intend to, in due course.

Mr. Speaker: Very well. Mr. Kinnock. A business question.

Mr. Kinnock: Is my right hon. Friend the Leader of the House aware that, just like the Leader of the Opposition, we, too, will be here until the bitter end and that it is probable that that end will be a little bit longer for us than for the right hon. Lady? Is he aware, also, that both in Opposition and in Government a very large number of hon. Members have sought a reasonable rationalisation of the way in which—[Interruption.]—

Mr. Speaker: Order. I cannot hear the hon. Member for Bedwellty (Mr. Kinnock). Is this a business question.

Mr. Kinnock: It is, Mr. Speaker, on the business for next Tuesday. Naturally I always try to maintain myself in order on such matters, especially when time is so precious. Is my right hon. Friend aware, further, that there is greater danger to this Parliament from fatuous and superficial scrutiny of Bills than from the expedition of business which the people of the country demand?

Mr. Foot: What we have sought to do in the passage of legislation through this House in this Session has been to combine a much greater opportunity for free debate than the Conservative Party has ever allowed with the right of the Government to proceed with their legislation.

Mr. David Steel: Since the right hon. Gentleman insists on quoting a precedent from way back when a Government were being frustrated by the other place, does he accept that there is no precedent at all for the appearance of so many guillotines on one day, except possibly the French Revolution, and will he now say how many hours we shall take to debate the motions? Will there be five debates, three debates or only one debate?

Mr. Foot: We are proposing three debates on Tuesday, which we believe will provide adequate time. The House will see when the motions are on the Order Paper that we are providing adequate time for the debating of the guillotine motions. The House will also see that we are providing ample time for the discussion of these Bills under the guillotine procedure. When I cite the precedent of 1908, it is not only a question of Bills being blocked by the House of Lords. That was the case in one instance. But three other Bills were blocked. Therefore, the Liberal Government of 1908 introduced five allocation Orders in that Session. What we are doing is to introduce five allocation Orders in this Session.

Mr. Michael Stewart: Since my right hon. Friend has pointed out that it is Conservative Governments who have made chief use of the guillotine in recent years, would it not be sensible if all parties now recognised that the time-tabling of major Bills is a necessary improvement to our procedures?

Mr. Foot: That case has been put forward by my right hon. Friend and others on previous occasions, of course. We had to deal with a situation in which we had had extremely extensive debate on the Bills, and I do not believe that any fair-minded citizen who looks at the time which has been allocated can say that we are injuriously restricting debate in this House.

Mr. Prior: Is not the allocation of one day for the Dock Work Regulation Bill totally inadequate? Is it not a fact that we had an agreement during the Committee stage to get the Bill out before Whitsun on the understanding that there would be no guillotine on Report? [HON. MEMBERS: "Oh!"] Is not this another case of the right hon. Gentleman breaking

what was known to be an agreement between the two sides?

Mr. Foot: Mr. Foot rose—

Hon. Members: Cheat!

Mr. Foot: If the official Opposition had held to all the agreements for getting these Bills through, there would have been no need for guillotines.

Mr. Molyneaux: As the Leader of a party which has not yet operated a guillotine, may I ask the Leader of the House whether, in view of the fact that the Northern Ireland Appropriation Order is the equivalent of the Consolidated Fund Bill, he will consider suspending the rule next Friday when this and other Northern Ireland business is taken?

Mr. Foot: On the previous two occasions when this has been suggested, it has worked very well. We shall be glad to operate the same system this coming Friday.

Mrs. Castle: Is my right hon. Friend aware that, in the Standing Committee on the Health Services Bill, Opposition Members have been not only playing for a guillotine but praying for it as a release from the tedium of their own excessive verbosity and that they would be deeply disappointed if we were not to proceed in the way proposed on Tuesday? Will my right hon. Friend please not disappoint them?

Mr. Foot: I am willing to satisfy my right hon. Friend when she makes that request. I am sure that she is properly interpreting the prayers which she heard in that Committee.

Sir D. Walker-Smith: On Tuesday's business, is not the Leader of the House ashamed that he of all people should assume the squalid and shabby rôle of the Robespierre of this Parliament—

Mr. Nicholas Winterton: And we all know what happened to him.

Sir D. Walker-Smith: Is not the right hon. Gentleman equally ashamed that the sole reaction of his right hon. and hon. Friends on the Treasury Bench to this violation of the decencies of parliamentary government is an embarrassed and guilty giggle?

Mr. Foot: In what we propose to do, there is no violation of the principle of


extensive free debate before decisions are made. I repeat that we are net prepared to accept any accusation of that kind from Opposition Members, because we have provided much more time for the discussion of these measures than was provided in many other cases by Conservative Governments.

Mr. Madden: Will my right hon. Friend accept that my constituents, who are anxious to secure comprehensive education for their children and who are being prevented from enjoying that opportunity by a rump of Tory extremists using every trick in the book to delay the introduction of comprehensive education, are looking to this House and the Education Bill to secure it? Can my right hon. Friend say when, under his arrangements, it is proposed that the Bill will complete its parliamentary stages?

Mr. Foot: The Bill should leave this House at the end of next week and I trust that it will proceed at a reasonable pace in another place. The sooner the House can get back to discussing the merits of the Bill, the better we shall be pleased and the better it will be for the country.

Mr. Nicholas Winterton: On a point of order, Mr. Speaker. I distinctly heard the hon. Member for Feltham and Heston (Mr. Kerr) remark that I was a member of the SS. I should be obliged if you will ask the hon. Member to withdraw that remark as it has no foundation whatsoever.

Mr. Russell Kerr: Further to that point of order, Mr. Speaker, I am afraid the hon. Member for Macclesfield (Mr. Winterton) is mistaken. I mentioned neither his name nor his constituency and the letters SS stand for something rather different—silly sod.

Mr. Speaker: Order. May I remind hon. Members that this is the House of Commons. In the excitement of this afternoon, hon. Members may say things that will not look so good in cold print. I hope that we can remember the dignity of the House. I shall allow two more questions.

Mr. Onslow: On a point of order, Mr. Speaker. If you rule no further than

that, it may be held that "SS man" would be in order as a parliamentary expression. Would you care to say that it is not?

Mr. Speaker: I understood that the hon. Member for Feltham and Heston (Mr. Kerr) had made it clear that he was not referring to hon. Members on the Opposition Benches. If a term casts a reflection upon an hon. Member's personal honour it cannot be used as a parliamentary expression. There is a list of such terms. I do not suppose that any hon. Member would like to be called a member of the SS, but I understand that the initials mean something else to the hon. Member for Feltham and Heston. In their normal interpretation, the letters would be unparliamentary and offensive.

Mr. Peter Walker: As the Leader of the House has spoken against more guillotine motions than probably any other hon. Member, why has he decided, in grouping these motions together, to allocate only three hours instead of 15 hours for the debate?

Mr. Foot: There will be three hours allotted for each of the three motions. I believe that the House will see that this is a perfectly satisfactory arrangement. I have opposed some guillotine motions in this House, but I have also supported some. This is the situation in which many hon. Members find themselves and that is why I say that so much of the storm raised today is synthetic.

Mr. English: While this controversy rages, would my right hon. Friend like to know of a motion which all hon. Members would approve? While we are doing something for ourselves on Friday, could we not do something for our secretaries and approve the first report of the van Straubenzee Committee? I do not think that any hon. Member would wish to oppose the possibility, if hon. Members wished, of our secretaries being put on Civil Service conditions.

Mr. Foot: My hon. Friend has raised this matter with me and I am considering what our approach should be. Certainly our response to this suggestion is sympathetic, but we must proceed with the proposals we have so far made. I think that the House would accept that


our proposals for secretaries are right in present circumstances.

Mr. St. John-Stevas: How can the Leader of the House reconcile his announcement that there will be five guillotines introduced on Tuesday with his earlier declaration that the guillotine is the last resort of a Government that cannot command the full-hearted support of this House and yet are determined to have their own way?

Mr. Foot: As I said in reply to the right hon. Member for Worcester (Mr. Walker), if the hon. Member spends the time between now and Tuesday reading every speech I have made on guillotines he will come to the debates better instructed than he is at present.

Mr. William Hamilton: Do I take it that there will be nine hours of debate on guillotine motions on Tuesday? If so, will my right hon. Friend undertake to look at the Standing Orders relating to these matters with a view to reducing the time spent on these ridiculous motions since experience shows that the debates are full of synthetic indignation and are immensely boring and repetitive? Would my right hon. Friend consider simply taking the speeches in the first guillotine debate and changing the names on top of the speeches for subsequent debates?

Mr. Foot: We are proposing that the House should deal with these questions on Tuesday according to the Standing Orders of the House of Commons as they exist at present.

Mr. Onslow: On a point of order, Mr. Speaker—

Mr. Speaker: Order. I hope that it is a real point of order because I want to move on to public business.

Mr. Onslow: In view of the unprecedented events which are programmed for Tuesday, may I put it to you, Mr. Speaker, that it would be much to the advantage of the House if the motions to which the Leader of the House has freely referred, and which must clearly have been drafted, could be placed on the Order Paper at the earliest possible moment so that we may examine them and deploy our arguments upon them, if need be, to you before you are put in a

position of having to make a final decision on them? Many of us may wish to put our arguments to you in this House rather than in any other place.

Mr. Foot: Further to that point of order, Mr. Speaker. The orders for the motions will be put upon the Order Paper speedily and in accordance with the way in which this has been done on previous occasions.

Mr. Peyton: On a point of order, Mr. Speaker. The Leader of the House made it clear that he had received advice from the authorities of the House on the construction of Standing Order No. 44—a construction which must be at least highly debateable, bearing in mind the words of the Order. Would you be kind enough to make arrangements for the advice given to the Government on this vital point also to be made available to all other parties in the House?

Mr. Foot: I refer the right hon. Gentleman to what I said a minute or two ago—

Hon. Members: Is this further to the point of order?

Mr. Speaker: Order. I think that we shall do better if we let the Leader of the House address me on a point of order with the substance of what he wishes to say.

Mr. Foot: Further to that point of order, Mr. Speaker. I refer the right hon. Gentleman to what I said before. I said that I understood that the question was discussed in November 1971, when the Order was put down. I think that that will be found to be the case. We shall accept the ruling that you may give, Mr. Speaker. Obviously, the discussions about this matter that took place in 1971 are strictly relevant to the situation.

Mr. Speaker: I shall bear in mind what the right hon. Gentleman has said.

Mr. Peyton: Mr. Peyton rose—

Mr. Speaker: I hope that hon. Members will not seek to prolong a discussion which is likely to take some time next week.

Dr. M. S. Miller: Further to the point of order that was raised by the right hon. Gentleman, Mr. Speaker—

Mr. Speaker: Order. The hon. Member may speak briefly to the point of order.

Dr. M. S. Miller: When my right hon. Friend took advice on the constitutional position of the timetable motions, did he take medical advice? The conscientious Members of Parliament—

Mr. Speaker: Order. It is clear that that is not a point of order. Mr. Adley, on a point of order.

Dr. M. S. Miller: On a point of order, Mr. Deputy Speaker—

Mr. Speaker: Order. I know that the hon. Member is angry, but he must not demote me yet. I called Mr. Adley to speak to a point of order.

Mr. Adley: On a point of order, Mr. Speaker. If the Lord President is quoting a rule that came into being only in 1971, what is the point of him trying to quote a 1908 precedent?

Mr. Speaker: That is a point of argument. It is not a point of order.

Mr. Peyton: Further to my perfectly genuine point of order, Mr. Speaker. I asked you, Mr. Speaker, whether you would be so kind as to direct the Clerks of the House to make available to the Opposition parties the advice which was given to the Government. I did not ask the Lord President for it. I would not ask him for any favours today. I seriously ask you, Mr. Speaker, to give those instructions.

Mr. Arthur Lewis: Mr. Arthur Lewis rose—

Mr. Speaker: The hon. Member may speak in a minute. The right hon. Member may be assured that I take his request seriously, but I am not talking about instructing the Clerks. I shall take very seriously what the right hon. Member said and shall duly report to the House. I shall see. I believe that all parties in the House are entitled to any advice that may be given, but it will come through me. I am titularly responsible in these matters.

Mr. Peyton: Further to the point of order, Mr. Speaker. I am much obliged to you, Mr. Speaker. We should like to have word for word the same advice as is given to the Government.

Mr. Arthur Lewis: Further to that point of order, Mr. Speaker. With respect, before you, Mr. Speaker, give an off-the-cuff reply, may I ask you to give serious consideration to these questions at some other time after you have had a chance to reflect on them and take advice?
I do not support the Government on this matter. Government Back Benchers often go to your advisers, Mr. Speaker. They are kind and helpful. They give us private information. It might be dangerous if the advice and information which we receive from the Clerks is brought forward here, as on other occasions the Clerks may be asked to reveal what they may or may not have done. That is dangerous. I should not like that.
May I ask you, Mr. Speaker, not to reply to these points of order until you have had time in which to consider them?

Mr. Speaker: The hon. Member for Newham, North-West (Mr. Lewis) has been in the House for 31 years. This is not the first time that he has advanced a substantial argument. Members on both sides receive private advice from the servants of the House and sometimes from me. However, I think that the House will be well advised to leave the matter with me at present. I shall not run away. I shall be here tomorrow.

Dr. M. S. Miller: With respect, Mr. Speaker, you did not allow me to finish my point of order.
With respect, I suggest that the health and the lives of Members of Parliament are more important than trivia.
Do not jump up, Mr. Speaker. This is important.

Mr. Speaker: The hon. Gentleman must not tell me not to jump up. I am being patient. I realise that he is still stirred up as a result of my telling him earlier that his reference to medical conditions was not a point of order. Medical conditions are hardly my responsibility. I rule on points of order. The hon. Member may complete his point of order now. I shall remain seated and patient.

Dr. M. S. Miller: You, Mr. Speaker, have some responsibility for the health and lives of Members of Parliament. The lives of conscientious Members of Parliament are more important than the


trivia with which we are assailed night after night by small groups of Opposition Members.

Mr. Whitelaw: On a point of order, Mr. Speaker. I was the Leader of the House in 1971 when the new procedure was introduced as a result of unanimous recommendation of the Select Committee on Procedure. I shall be grateful if I might make a submission to you, Mr. Speaker, which I ask you respectfully to consider before you give your ruling on the Government's procedure for Tuesday. I do not accept that when that procedure was introduced it was ever envisaged that it would be used to take timetable motions on five Bills in one day. I should like you, Mr. Speaker, to consider the submission that that fact should be considered with the other factors when deciding on the operation of that Standing Order and the Government procedure.

Mr. Speaker: I shall give consideration to what the right hon. Member said.

STATUTORY INSTRUMENTS, ETC.

Ordered,
That Commission Documents Nos. R/2688/ 1/75 and R/2689/1/75 relating to Tax Exemptions be referred to a Standing Committee on Statutory Instruments, etc.—[Mr. Foot.]

ORDER OF THE DAY

FINANCE BILL

Not amended (in the Committee) and as amended (in the Standing Committee), further considered.

4.30 p.m.

Mr. Speaker: Before I call the first amendment, I should like to inform the House of an alteration in the provisional selection of amendments. Amendment No. 259 should be added to the list. With it Amendments Nos. 260, 261 and 262 may be discussed. Amendments Nos. 84 and 266 should be struck out from the list of amendments selected.

Schedule 6

SECTIONS TO BE SUBSTITUTED FOR SECTION 20 OF TAXES MANAGEMENT ACT 1970

Amendment proposed: No. 73, in page 126, line 40 leave out '20B' and insert '20C'.—[Mr. Joel Barnett.]

Mr. Speaker: With this we may take Amendment No. 278, in page 126, line 40, leave out from beginning to end of line 19 on page 127.

Sir Geoffrey Howe: The Government's amendment is formal. The Opposition's amendment, No. 278, is intended to give the House an opportunity to have a further look at the extremely important subject of what has come to be known as the snoopers' powers—the tax inspectors' inspection powers provision.
The amendment is intended and designed to strike out from Schedule 6 the basic provisions giving the Inland Revenue powers of entry into private premises at any hour of the day or night. I intend to concentrate my remarks on that issue. I should make it plain at once that the proposals put forward by the Government, and still persisted in, to give the Inland Revenue powers of entry into private households and premises by day or by night are absolutely opposed by the Conservative Party. That was the position that we set out on Second Reading, and it is the position to which we adhere today.
As a result of the prolonged, intense and fierce opposition waged against these proposals since they first appeared in


the text of the Bill, opposition sustained by my hon. Friends in Standing Committee, a large number of changes and amendments have been made by the Government. All those changes represent modest concessions to good sense and reason in this matter. The fact that the Government made so many changes in Committee and for Report have tabled 22 further amendments to these provisions amounts to an acknowledgement by them of how right the Opposition and people outside the House were to be as gravely concerned as we have been about the powers that the Government seek to take for the Inland Revenue.
Moreover, grave concern is well justified by the fact that the Government— whether the responsibility rests with the Chief Secretary or the Chancellor of the Exchequer, or those who advise him, we know not—have dared to bring before the House proposals designed and conceived as these were originally. Their admissions of guilt by the changes that they have made demonstrate how ill-judged the original proposals were. They were wholly ill-conceived at the outset.
I take only one example. The original proposals to give the Inland Revenue powers to invade people's homes by night or by day—by force if necessary—were extended to enable documents to be seized in respect of which professional privilege was or ought to have been available. In no comparable provisions of which I know have any Government sought to override and disregard principles which are regarded as making immune to disclosure and discovery documents and advice passing between the citizen and his legal advisers. The fact that those principles have been wholly disregarded and are to be amended by amendments to be discussed later demonstrates how ill-conceived the original proposals were.
There is an important feature of this matter. The launching of these proposals and the extent to which they have been overtly and publicly supported by senior officials of the Inland Revenue—not least by Mr. Plant, the general secretary of the Inland Revenue Staff Federation —have done great damage to the reputation of the Inland Revenue and those who work in it. They have caused many citizens to wonder how far the Inland

Revenue, on whose integrity and independence the tax collection machinery depends, is now adopting a political position. That consideration must cause grave concern.
The Government have done that damage initially by their decision to introduce these powers, and that damage has been increased by the way in which Inland Revenue officials and their representatives have sought to speak out in support of them. The point cannot be more crisply put than it appears in a letter to The Times by a former general secretary of the Inland Revenue Staff Federation, Lord Houghton, in which he said:
When tax gatherers fall in behind Ministers to demand sterner measures of enforcement they run two risks. One is that their deservedly high reputation for impartiality and fair-mindedness towards the public will be harmed by the slings and arrows which will inevitably follow. The second is that they will get let down when Ministers give ground, as they usually do, under political pressure.
Both those risks have been made manifest on this occasion, the first a great deal more clearly than the second.
There is continuing concern about the nature and shape of these powers and about the many concessions and changes that we have demanded, but that have not been made. Last night we debated the need to have some safeguards to the earlier provisions of the schedule relating to the position of a wife or children, the need to take some care to exclude from the range of inquiries companies which had ceased to exist, and the need for further restrictions on the range and kind of papers that can be called for from the client whose affairs are under investigation.
On these proposals we have still to debate the suggestion that the revenue officer should not be allowed to inspect a person's home unless accompanied by a police officer and that only a police officer should be allowed to remove items from a citizen's home. We have suggested, and the Government have failed to accept, that the powers of entry should be limited so that they operate only during the hours of daylight and on weekdays. But the Government insist that the powers must be available throughout the week around the clock—Sundays as well as weekdays.
We have suggested that these powers should be made the subject of an annual report on the way in which the authority is being exercised. But that, too, the Government have chosen to neglect. They have also refused to accept suggestions that the powers should be limited only to frauds of more than a certain size and that the Inland Revenue and its officials should accept responsibility for the security of the premises that they have invaded and explicitly for the damage that they have done. All these suggestions have been swept aside or rejected by the Government. That is why we are concerned that they should want to press ahead with these proposals.
The Government should reflect, as I am sure they must have done, on the damage that has been done to the reputation of officials of the Customs and Excise by the growing public concern about the way in which the VAT inspection powers are being used. When we introduced those powers in 1972 we made it plain that we should want to review the way in which they had been operating and to consider what changes should be made. That argument is now strongly made out.
There is grave concern about the extent to which the invasion by officials of the Customs and Excise in pursuit of VAT has caused shock, damage and distress to members of families who are entirely innocent. If there is concern about that, how much more are we entitled to be concerned about this proposal to give comparable powers to officials of the Inland Revenue?
As was pointed out in our first debate on this matter, there is a great difference between the authority and responsibility of the Inland Revenue and that of the Customs and Excise. The Customs and Excise can at least be seen to be concerned with the collection of tax from citizens who have been acting as tax collectors, because people who handle VAT are part of the tax collection process. Powers may be justified in that respect, but they are certainly not justified in this form—namely, the power to invade the home and premises of a private citizen in respect of his liability to account for income tax.
Ample powers are available in other respects in the taxing statutes. They have proved sufficient for a very long time.

Therefore, there is no justification for these proposals.
In any event, this is a remarkable way of introducing these proposals. They are not proposals that should find a place in the Finance Bill at all. They are proposals that could in other circumstances and, we suggest, should have been contained in a special Revenue Bill dealing with the administration of the Revenue.
The advantage, which is an important one, is that this matter would not then have to be considered within the constrained timetable about which the Chief Secretary was talking with such concern —I am sure his concern was genuine—the other day. Finance Bills are hard enough to get through in the time allowed by the Provisional Collection of Taxes Act, and to load them with this kind of proposal, making far-reaching changes in the administration of the Revenue, is to add to those difficulties.
On Tuesday, when we discussed the way in which the Government were handling this matter, I spoke out for those who are gravely concerned about the Government's pattern of handling financial legislation. Since then, I have received a copy of a letter sent to the Chancellor of the Exchequer from the Association of British Chambers of Commerce, which wrote to the Chancellor on 13th of this month, the very day when we last discussed this matter, in these terms:
For the second year running we are faced with a Finance Bill which has emerged substantially amended from Standing Committee and which only became available from the Stationery Office last Thursday. Many further important amendments and new clauses have since been put down by you. The House of Commons is expected to deal with what is almost a new Bill in a mere three days this week. This Association like all other interested bodies is in effect denied adequate time to consider the new proposals and to make representations on them: the House of Commons is denied the benefit of the outside expert advice behind such representations. This is a wholly unsatisfactory procedure for the introduction of any legislation and is especially so for fiscal legislation.
If that is true about the generality of the Finance Bill, it is even more true about the powers we are now discussing, which ought not to have been included in the Finance Bill and which ought not to have come before this House at all.
The point is that powers of this kind are unnecessary to combat evasion. The


Government failed to satisfy my hon. Friends in Committee that there had been any growth in evasion to justify these changes, if they could ever be justified, which we do not accept, during the last 18 months. Both the chairman and the deputy chairman of the Board of Inland Revenue have made plain that their existing powers are adequate for the task that they have to perform. Nor are these powers justified by the case frequently put forward by the Chief Secretary and his ministerial colleaeues—that these powers will not be used except for a few particularly serious cases.
That is no defence, because the Chief Secretary can give no such assurance. The powers will find their way on to the statute book. They are exercisable, subject to the controls contained in the Bill, by Inland Revenue inspectors and officials under the Board of Inland Revenue. The Minister is not able to direct the Board in relation to individual taxpayers as to what it may or may not do, and he can give no such assurance. The powers will come on to the statute book to menace the many, and if it be true that they are designed only to catch a few particularly serious offenders, even that will not work.
The few people against whom the Chief Secretary has designed this massive legislative apparatus are the people who will always be able to avoid confrontation with the law in this kind of way. They are the people whom the Chief Secretary himself has come near to asserting are uncatchable. They are the people who will know well in advance the provisions with which the House is now dealing. But society as a whole will have to face the existence of these powers on the statute book. They are powers which can be used and can strike at many taxpayers at all income levels and at all levels of society.
The Chief Secretary has several times repeated the assurance that these powers will not be abused and that we can rely upon him and upon the beneficence of those who will have the right to exercise them. At the moment there may be some reason for accepting at least part of that assurance when we are feeling in a generous mood, but that kind of assurance is just the kind of assurance that leads so easily down the road towards

the invasion of freedoms and towards the removal of liberty.
We have been given the assurance "Do not worry boys, we will not use these powers much. They may look pretty grim but we will not use them except in a few serious cases." But that sort of assurance can all too easily justify powers which are likely to turn out to be quite intolerable. Our position is that if this provision reaches the statute book, it should be struck out therefrom. It should be the task of the House this evening to see that this provision does not reach the statute book. I invite my hon. Friends to support me in this amendment in order to see that it does not.

4.45 p.m.

Mr. Graham Page: Like my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) I wish to address my remarks to Amendment No. 278, which is grouped with the one which has been formally moved by the Chief Secretary. This is an amendment to remove that part of Schedule 6, the whole of which has become known as "The snooper's schedule". It is in many respects, in addition to this last section, objectionable. We discussed some of it earlier this morning—that part of it which gives the power to call for documents of taxpayers and others, the power to call for papers of tax accountants and finally, it reaches its peak of odiousness in the provision which our amendment seeks to delete—the entry with warrant to obtain documents.
For the sake of brevity, I have endeavoured to list as clearly as possible the objections to this part of the schedule. The first is that, as far as I know, there is no other provision in the law which allows a tax officer to break into a person's home. The right of the Customs and Excise officers, who have always been looked on rather as policemen in their sphere, is not relevant to the provision now proposed.
The sanctity of the home should transcend any expediency of collecting evidence in relation to a tax fraud. I stress "collecting evidence", which is about all that is being done in this schedule if the right of entry to a person's home is granted. It is not an entry to prevent crime which is being done and it


is not an entry to catch a criminal in the act of his crime but an entry to search, and to fish, for evidence on which to support some claim against a taxpayer.
Secondly, it is not merely a power to enter the home of the allegedly fraudulent taxpayer. It is a power to enter anybody's home merely to find evidence of some fraud, possibly by some other taxpayer.
The example occurs to my mind of an innocent employee of some company suspected of fraud. The inspector might think that if he entered to seize the pay slips of that employee, they would be good evidence of some fraud being carried on by the company. Are we to sanction that sort of thing? The Chief Secretary said that we need not worry, that all sorts of authorities have to give permission for the warrant. But if those authorities are faced with a claim by the tax officer that an employee has pay slips in his house which may be very useful in showing that there has been some fraud by his employer, how can they refuse a warrant in such a case, faced with the provisions of this proposed new section in the Bill?
Third, unless it is the home of an innocent person, it seems to me that the power will be quite ineffective and there will be an invasion of personal liberty for no purpose. The fraudulent person will make certain that no incriminating documents are in or about his house. It is the innocent person, perhaps unaware that he happens to hold documents of this kind, who will be subjected to his home being broken into.
Fourth, when the home is broken into, the tax officer may use the other powers in the schedule to cross-examine the family in the house. This power, if it is used, will be so shocking to the public that there will be an outcry against it.
Fifth, privileged documents which may be found in the house are not protected. If they happen to be in the house of a solicitor, barrister or accountant who has been advising someone, they will be protected, but if they are in the house of the client they will not be protected as the provision stands. We may discuss this on a later amendment, but I wish to make the point now. Let us suppose that a client has been receiving advice

from his solicitor, and he has given his solicitor a proof of evidence. The solicitor sends that proof of evidence to be checked by the client. That night, the inspector may find that proof of evidence in the taxpayers' house and, as the Bill stands, he will be perfectly entitled to seize what I believe to be a privileged document. It is not protected as the schedule stands.
I come now to my sixth objection. As my right hon. and learned Friend said, this has been introduced as a tax provision in a money Bill, and it is therefore deprived of proper debate and amendment in another place. It is an amendment to the Taxes Management Act 1970. I emphasise the word "management". It is not an amendment to the Taxes Act. I dare say that there are many precedents for the inclusion of a provision of this type in a Finance Bill and in other money Bills, but I hope that this will be regarded as such an exceptional example that we shall be able to say in future that it ought not to be done, that we ought not to deprive another place of proper debate and opportunity to protect the individual. I say that all the more strongly since we have been rushed into the Report stage without proper opportunity to consider the amendments which the Government have put down.
It is regrettable that there is not one Member on the Government Back Benches to listen to the case being put. One hon. Member has just entered the Chamber, but that is all. I hope that he will listen to the rest of the case put by my right hon. and hon. Friends and come to the conclusion that this is a thoroughly odious provision, that it is unconstitutional, and that it ought never to have been included in the Bill.

Mr. Emlyn Hooson: I strongly agree that this provision ought not to be introduced in a money Bill. In a modern and sophisticated society such as ours, there is inevitable pressure for more powers of investigation. From the Opposition side, there has been tremendous pressure recently for greater powers of investigation against those who defraud our social security system. That is one aspect of fraud in the Welfare State, and there is very little public patience with it. That lack of public patience is


reflected in the demand from this side for far greater powers of investigation.
Equally, in a modern State such as ours there is little public sympathy with tax evasion, of which there is a fair amount, as there is a fair amount of defrauding of social security. None the less, the Government have been extremely unwise to introduce the provision in this way, although there have been substantial amendments and safeguards provided.
Is the remedy worse than the evil? In my experience in the law, those whom these Draconian measures are designed to track down are often the very people who escape. If there is a provision that one can invade a person's house to acquire papers and so on in order to prove a certain case, the major swindler will take care that such evidence is not there. When the Conservative Government in 1972 introduced the powers of the VAT men to search houses and so on, assurances were given to the House that those powers would be used only in extreme cases to catch the big fish. In practice, this has not been so. As I understand it from the complaints which I have received and heard of, those powers have in practice been fairly widely used on what one may describe as small fish.
Will there not be unnecessary pressure for greater powers of investigation from people with different kinds of social and political motivation? I have already adverted to the fact that, principally from the Opposition, there has been great pressure recently for powers to catch those who swindle our social security system, and that pressure is perfectly understandable. Yet the very people who press for those powers are the ones who object to them when we come to consider investigatory powers to catch tax evaders.
We have often heard bitter complaint from the Government side about social security snoopers. Why, it is said, should people who are benefiting from social security be subjected to snooping? That argument has been heard many times, principally from the Government side.
The truth is that the House ought to consider, not in a money Bill, the balance between private rights—a man's home being his castle, after all—and the evil which the powers are intended to remedy. The Government would be wise to with-

draw this provision and consider it far more maturely.
At the Bar, I have always believed that there is much to be said for the rule which prevents a spouse being a compellable witness against the other spouse. The preservation of family life and the unity of the family, in my view, is infinitely more important than, for instance, tracing the odd revenue fraud or the odd social security fraud. All these things have to be kept in balance.
Will the Government tell us what has been the result of the additional powers given to the VAT inspectors? What have the powers to search houses resulted in? In how many cases has there been such an investigation, how many have resulted in substantial recovery of money, how many have resulted in prosecution, and how many have proved fruitless?
That is only one aspect of the case, for one does not see the effect on family life. A man may be a perfectly decent family man yet still engage in some kind of tax fiddle. One does not see the other side of the coin. The Treasury ought to give figures so that the House may consider this matter.
I cannot understand why the Government object to an annual report on the way the powers are used. There should be an annual report to the House on all these matters. Moreover, if these powers are to be introduced, they should be limited. Why should they be extended to the weekend and the hours of darkness? Has it been found necessary, for example, in VAT investigation? It is well known that police officers will often execute a warrant late at night or even at dawn, but there are obvious reasons there, and those reasons do not seem to me to be relevant or to apply to the kind of circumstance envisaged here. A substantial safeguard would be created if a police officer had to accompany the Inland Revenue inspector.
5.0 p.m.
The provisions are ill-considered. We have no idea what the suspected tax-evasion is. We have no idea what sums are involved to cause the Government to put forward this proposal. Why is it necessary now when it was not necessary before? The Government must explain that before they introduce such an amendment to a schedule of a money


bill. There is little public sympathy for tax evaders. But there is a heavy onus on the Government to show why the provision is necessary.

Mr. George Younger: There are many very objectionable aspects of a provision that enables a person's house to be entered on suspicion that it contains evidence of tax fraud. But I shall concentrate on only one issue, which was not properly covered in our debates upstairs. Even if I accepted that these powers were necessary, accepted the methods that the Government are suggesting, and accepted that citizens must recognise the obligation to open their houses on demand to tax officers who believe there might be evidence of tax fraud on the premises, I should first have to be satisfied that there was some overriding public need. I should have to be satisfied that this form of action was at least almost the only method of obtaining essential information for the Revenue.
The hon. and learned Member for Montgomery (Mr. Hopson) asked whether the remedy was worse than the evil itself. The trouble is that we have never been told what the evil is. The Government have not said that the provision will put right a substantial number of cases. The Financial Secretary said that only a small number of cases would be affected. If there is only a handful of cases, he could, if he wanted, tell us exactly how many. He could tell us how many cases his officials know about, how many could have been caught if such powers already existed and how much benefit would have been obtained. I accept that if there are thousands of cases the Minister would not know the details. But if there are only a handful, he and his officials would be able to say that they could have caught particular individuals had they had this power.
Before we pass anything as sweeping as this provision, we must be told something about the cases and the need for it. Are large sums of money being denied to the Revenue which could be brought in if a tax officer were able to walk into private premises? Is it worth creating all this concern? I accept that it is worth it if there are large sums of money involved and if there is a terrific amount of evasion. If, in future, that is proved to he so, the Chief Secretary will

be shown to have been talking nonsense when he said that there was only a handful of cases. Perhaps that handful of cases involves vast sums of money, but, if so, the Minister should know exactly what is involved.
We could be criticised if we let the measure go by without a shred of evidence apart from vague generalisations. I hope that the Minister will tell us about the mounting evidence of fraud due purely to the fact that people can keep things in their homes which no one can get out. The Minister has not made his case. I hope that he will not shelter behind the defence that he cannot be expected to quote individual cases. I ask not for names or amounts, but for an explanation of what this difficult measure is meant to cure. We must know that before we accept it.
It is no use the Minister saying that he does not believe that the powers will ever be used unreasonably, or that he does not think that the members of the Inland Revenue Board will give permission to act unreasonably. The Minister will not be in his present post for long enough for that undertaking to be meaningful. He has no control over future members of the board. Although he would be innocent of the charge, if the power were abused, he could find coals of fire being heaped on his head because he was the Minister who assured the House that the provision was an innocent method of catching a few tax frauds.
The provisions could be used maliciously and wrongly and they could be easily extended. It is only worth introducing this power if we are satisfied that it will be of overriding public benefit. Only then would it be worth endangering the sanctity of homes, worrying people unnecessarily and introducing all this paraphernalia. If the Minister cannot tell us that, we should not agree to the amendment.

Mr. Peter Rees: Even after the considerable amendments that have been extracted from the Government through the efforts of my hon. Friends and myself in Committee, Schedule 6 contains some of the least attractive provisions to be found in the statute book. The least attractive provision in the schedule is Section 208. If these provisions had been introduced on


their own in some other field, it would have been only after the most prolonged and searching debate.
I have no doubt that the Chief Secretary will remind us that we spent 84 hours in Committee. I remind him and the House that of those 84 hours barely four or five were devoted to Schedule 6. It is nothing short of a public scandal that such measures, which are of profound constitutional significance, should be lost in a schedule of provisions at the end of a long and complex Finance Bill. They deserve separate debate and I hope that the House of Lords will consider them separately from the financial provisions which form the core of the Bill. These are matters that affect the liberty, the privilege and the property of the subject and the Government have no business to palm them off on the House as an unimportant schedule to the Bill.
It is a commentary on the whole conduct of the Government that there has been no time between the conclusion of the Committee stage and the printing of the Bill with its amendments for outside interests to voice their concern about the scope of the provisions and to weigh the efficacy of the amendments that we have extracted from the Government. Against that background, it is right for all of us to come back again to the question that hon. Members have asked on previous occasions—what case has been made out to justify these provisions?
The Chief Secretary has fobbed us off with sweeping and vague generalisations. I have received no satisfactory answer to my request to him to tell us what evidence he is prepared to put before the House that evasion is on the increase. He may have recourse to the interesting public pronouncements of Mr. Plant. I have no doubt that in making them Mr. Plant is actuated by a high sense of public duty. He is the secretary of what he chooses to describe, perhaps not inappropriately, as an old and well-established craft union, but although he is not trammelled by the same official constraints as those by which the Chief Secretary may feel himself limited, he has been unable to produce any hard evidence of an increase in evasion.
I do not think that I am breaking any confidences when I say that I wrote to

Mr. Plant and received a courteous reply from a Mr. Christopher in his absence, saying that one had only to use the evidence of one's eyes. What kind of case is that? If that is the case on which the Chief Secretary relies as justification for these odious measures, one almost suspects that, perhaps feeling a little bruised and uncertain after his encounters with the Tribune Group and the TUC, the Chancellor of the Exchequer may be looking for a union to sponsor him next time round. Maybe he will turn to the Inland Revenue Staff Federation. Perhaps that union, like NUPE or COHSE, has set him a short essay, saying "Write not less than 1,000 words on another way of extracting howls of anguish from another body of taxpayers. Candidates are required to cover both sides of the paper." Presumably the outcome is the schedule. No doubt the Chief Secretary will tell us whether his right hon. Friend has had a hand in all this.
I have a second question to which I hope I shall receive a precise answer. With his grasp of all fiscal matters, the right hon. Gentleman is capable if he chooses of giving very precise answers, but in other situations he retires behind a cloud of generalities. I suspect that that will be the tactic he employs now. If he feels a little coy about giving an answer, perhaps we shall hear from the Solicitor-General, who, if I may say so without sounding patronising, made interesting if slightly uninformed interventions in our debates upstairs. I well understand his difficulties. He is trying to advise the Government on a mass of controversial, ill-digested legislation. I wish that he had been more closely involved in our debates earlier. Let us hope that he or the right hon. Gentleman will be able to tell us wherein the existing powers given to the Commissioners of Inland Revenue by the Taxes Management Act, which has been in force for many years, have suddenly proved inadequate under the present Chancellor.
The Commissioners can request a body of appeal commissioners to precept documents, call witnesses, raise assessments and ask the taxpayer to displace not only the basis of the assessment but the quantum. Why suddenly, during the right hon. Gentleman's tenure of his distinguished office, should the Inland Revenue find itself unable to cope with this unquantified increase in evasion?
Let us look again at the odious provisions of the schedule. They deserve the most careful, minute and rigorous scrutiny. The first enables the Revenue to extract documents from a taxpayer and his family. Because many hon, Members were not privileged to take part in our debates in the early hours of this morning, I remind the House and the public that the Government are not even disposed to protect from the inquisitorial methods of the Revenue children under the age of 16. We had a very modest amendment to provide that protection, but the Chief Secretary, in the bland and genial way that he can so often adopt when putting forward the most unattractive of cases, said that it was right and proper that the Revenue should be entitled to pry into the bank books and savings books of children under 16.

Mr. Graham Page: Their piggy banks.

5.15 p.m.

Mr. Rees: Indeed. This is a most disreputable and unattractive course of action. Even the widow of a taxpayer who has remarried may be subject within six years of his death to harassment by the Inland Revenue. Is this the kind of measure we want to see put on the statute book?
The next provision extends the attentions of the Inland Revenue to the papers of a tax accountant. I need hardly remind the House that one slip by a tax accountant, even unconnected with the affairs of the taxpayer which the Revenue have in their sights, can expose him and all his papers to the Revenue's intrusive eyes. The protection of professional privilege, which we debated rather cursorily last night, will prove illusory in its scope. I do not wish to cover that ground again, because the Chief Secretary and the Solicitor-General have promised to receive representations from the professional bodies, which are acutely concerned about these provisions.
But it is fair to ask why these bodies should have to make their representations now. The provisions are not concerned with rates of tax. There could be no abuse as a result of advance publication. Why should not the Chief Secretary and the Solicitor-General have canvassed the professional bodies' opinions more fully before introducing

these measures if they had any doubts about them?
Why should not the provisions be introduced by a special Bill to amend the Taxes Management Act? That could be done at any time, perhaps in the autumn, without affecting the smooth flow of the Government's legislative programme. The Patronage Secretary probably would not welcome the introduction of another Bill, but the liberty of the subject takes precedence over his momentary anguish and that of the Leader of the House. They have shown themselves remarkably unaware of the basic principles of the conduct of parliamentary business.
I come to the final provision, now to be entitled Clause 20C, which equips the Inland Revenue with powers which can be paralleled only in the criminal law, under which the police can apply for a search warrant. The Chief Secretary will say that there is a fair analogy with the criminal law because a tax avoider or evader—as we discovered last night, the terms can sometimes become a little blurred in debate—is no better than a criminal and should be exposed to the full rigour of the law. He will say that the Inland Revenue, like the Customs and Excise and police, should therefore be entitled to break in and ravage his possessions.
There is one essential difference that appears to have escaped the Chief Secretary's attention. Drawing on such limited experience as I can, and on the experience of my hon. Friends who practise in this field, I remind the House that where a search warrant is issued the police can in most cases point to a crime having been committed. That is rarely so in taxation matters. The Revenue will be bound to act on suspicion. I suspect that, through the sinisterly named Special Offices, the Revenue will undertake a series of spot checks from time to time.
The Chief Secretary will say that that is impossible, that the Inland Revenue does not operate like that because its staff are gentlemen of integrity and public spirit. I yield to no one in my admiration of the Inland Revenue as an administrative machine, but in any machine there will always be people who are a little over-zealous, a little over-conscientious, people whose judgment is a little at fault.


They will be tempted to abuse these powers.
The Chief Secretary will say "Of course, but there is the judicial safeguard. That is what the Opposition asked for, and that is what we have given them." I should like to tell the right hon. Gentleman of the limitations of that judicial safeguard. If I overstate the case, the Solicitor-General will seek to put me right and advise the House, as it is his privilege and duty to do.
As I understand it, the procedure is that the Inland Revenue inspectors, authorised, it may be, by the board—I know that the right hon. Gentleman will say that that is an additional safeguard, but the members of the Inland Revenue Board are concerned with the whole range of fiscal problems and the amount of attention that they will be able to give to this sort of application will, I suspect, be rather limited—will go to the appropriate judge, and say "We wish to investigate the affairs of Mr. B. We want to break into his house. We want a warrant. We suspect that many incriminating documents are there."
What sort of prima facie case will they deploy in that situation? How will the judge be able to resist their blandishments? Will the taxpayer have notice? Will he have a chance to be present and to be represented? Will he have a chance to deploy his case?
As I read the provisions—I hope that my eye is not blurred by last night's debates—the Inland Revenue will have to make out only a prima facie case. It will have to convince the judge that a Revenue fraud has been committed and that its representatives should break in and abstract all the documents. Some judges may take a stricter and more censorious view of these applications than others. Time alone will show.
I am not pretending that the safeguard is illusory. It would be quite wrong to do so as I was one of those who pressed the right hon. Gentleman to introduce it. However, it is ridiculous to pretend that this is a complete answer to all the fears that are felt by my right hon. and hon. Friends.
I believe that these provisions should be entirely eliminated from the Bill, but it must be assumed that there are not enough Labour Members to support that proposition. If we had been concerned

with police powers, Labour Members would have been flocking into the Chamber to press their point of view on the Home Secretary, but we can assume that they will be noticeably absent from the opposition Lobby on this occasion, and I hope that my right hon. and learned Friend will be pressing this matter to a Division.
I suggest that one or two modest measures are introduced to humanise these otherwise odious provisions. First, drawing from a Bill that has only recently received the scrutiny of the House, I believe that there should be an independent complaints tribunal so that oppressive action by the Inland Revenue can be scrutinised with the same calm judicial care as misdemeanours by the police. Like the hon. and learned Member for Montgomery (Mr. Hooson), I believe that the Chancellor should be required annually to lay before the House a report on the operation of these provisions so that every case where they have been invoked can be scrutinised and, if need be, tested in the Chamber.
Finally, I believe that any taxpayer who has been found to have been treated oppressively and who has ultimately cleared his name should have the right to compensation for the expense and trouble to which he has been put. Surely that is the least we can expect from the Government on these measures.
I have a regard for the Inland Revenue machine, but I believe that these measures will probably not yield a significant amount of tax and, if used extensively, will weaken such sympathy and cooperation as still remains between the taxpayer, his professional adviser and the Inland Revenue machine. The Chief Secretary may say that these powers are reproduced in the fiscal legislation of many civilised countries in the world. I would reply that in the countries where perhaps one can find a faint echo of them there is probably a system of self-assessment by the taxpayer.
If the right hon. Gentleman says that we shall go over to such a system, so be it, but this is not the Bill in which such powers should be introduced. If they are to be introduced, we should have a far-reaching debate at a later stage on a new Taxes Management Bill when the implications of such a move could be discussed. However, if the Inland Revenue wishes to


retain the power to assess the taxpayer, it would be well advised to press the right hon. Gentleman to withdraw these provisions. I can say with utter confidence that at the end of the day they will weaken the co-operation that the Inland Revenue presently enjoys. At the end of the day they will operate to the disadvantage of the taxpayer, his advisers and the Inland Revenue's tax gatherers.
It is right and proper for us to speculate from whose disordered imagination these provisions sprang. They cannot be attributed to the Chief Secretary, because we know that he is a man of broad and humane sympathies, a man who has been in private practice as an accountant. No doubt he will soon be returning to private practice. It is not for me to come between the right hon. Gentleman and my hon. Friend the Member for Macclesfield (Mr. Winterton) and to speculate on the sort of advice he will be giving to his clients. I have no doubt that it will be highly reputable, creditable and worth while. No doubt he will be highly rewarded for it. Therefore, we let out the Chief Secretary.
Obviously, the Solicitor-General cannot be responsible as this is not his sphere of law. Responsibility cannot lie with any other junior Ministers because they are not present to lend their moral support. The finger of suspicion points to the Chancellor of the Exchequer.
The hallmarks of the Chancellor as a parliamentary performer are those of a blusterer and a bully. These provisions bear the stamp of the Chancellor of the Exchequer. He has been ever ready to abuse his high office, to abuse the considerable powers with which he has been entrusted on our behalf. He has been ready to make the general body of taxpayers squeak with anguish. He has a disreputable and discreditable record. I believe that at the end of the day he will pass down in history as one of the least attractive Chancellors we have ever had to endure.

Mr. Ian Gow: During our debates in Committee, the Chief Secretary justified this part of the schedule by saying
The fact is, and I will come back to this point, that what we are talking about in terms of the powers that are being sought for the Inland Revenue … will only be used for the hard core of tax evaders on a large scale.

It may be thought significant that he then said:
I know it is not written into the Bill…It is inherent in it.
The provisions that the amendment seeks to remove contain nothing to suggest that the powers to enter premises forcibly can be used only for what the right hon. Gentleman described in Committee as the hard core of tax evaders. Later in his speech in Committee the right hon. Gentleman said:
The fact is, however, that if we exclude the power to search the private home, in the case of these tax evaders".—[Official Report, Standing Committee E, 15th June 1976, c. 794–796.]
That was the theme to which he returned constantly, but there is no mention of hard core-tax evaders in the subsection.
It is right that the House should direct Its attention in the most rigorous way to the manner in which these powers can be exercised in conditions that will be much less favourable to the tax inspector than under the benign influence of the Chief Secretary.
As my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) said, the Chief Secretary is not with us for ever. That also applies to the Solicitor-General. When the courts interpret powers conferred by Parliament, they interpret strictly the wording of the Act. Therefore, it is no use the Chief Secretary in Committee, or even later this afternoon, seeking to give assurances about the way in which judicial authority will be exercised, as defined in the subsection which we seek to remove. It is no use the right hon. Gentleman giving any assurances that the provisions contained in the subsection will be exercised by judicial authority. It is not open to the Executive to give any directions as to how the judiciary will exercise powers conferred upon it by statute.
5.30 p.m.
There is one point of supreme importance contained in the provisions that the amendment seeks to remove. In this provision there is power for issue of a warrant by the appropriate judicial authority to authorise an officer of the Board to enter premises. That warrant can be exercised by day or by night. It can even be exercised on the Sabbath, but all the arguments deployed in Committee on that point fell on deaf ears.
What will happen when the first warrant is issued, since it must be acted upon within 14 days? I am sure that the first occasion on which this happens will be treated by the media as a test case of the utmost importance. There will be a knock at the door or a ring at the bell of a suburban house, or—perhaps at a not so urban house—

The Chief Secretary to the Treasury (Mr. Joel Barnett): In Eastbourne?

Mr. Gow: It could be in Eastbourne. What will happen? The person whose door is knocked upon in the middle of the night is likely to say "Go to hell"a perfectly respectable attitude. The case will become a great cause célèbre because the wretched officer of the Board of Inland Revenue, clothed with the authority given him by the Chief Secretary, will arrive in the most unpropitious circumstances at the citizen's door and is likely to be surrounded by all the attentions of the media.
What will be the result? The growing tendency of the citizen not to co-operate with an unloved and unlovable Executive will be given more fuel. The increasing reluctance of the citizen to co-operate with the tax gatherers will be given added impetus because the media will be alerted. The television cameras will be there outside the door of No. 10 Joel Barnettstrasse. Great attention will be paid to this matter in the Press, on the radio and on television. The Inland Revenue, which we are seeking to clothe with greater respect in terms of the citizen, will be brought into still further disrepute.

Mr. Nicholas Ridley: It is surely unlikely to be No. 10 Joel Barnettstrasse because that is likely to be a council house which remains in public ownership. They are bound to pick on a council house which has been sold by the next Tory Government.

Mr. Gow: I am sure that my hon. Friend can develop that point if he is called to speak in this discussion. The point is of great importance because the evil, if there is one, that we seek to remedy—namely, the curbing of what was described by the Chief Secretary as the hard-core tax evaders on a large scale—is already covered by various

powers. The possibility of abusing this new power and of driving yet another wedge between Government and governed, with the prospect of increasing the mistrust between taxpayer and tax gatherer, is a serious matter indeed, and very serious at this juncture.
It is no good the Government saying "These powers will be used in only a few cases." They already possess powers where they suspect that a fraud is being committed by a taxpayer. Therefore, there is no need to confer on the Government these additional powers at a time when there is no evidence that they are needed to enforce the tax laws.
For these reasons, I hope that, even at this comparatively late stage, the Chief Secretary will recognise that he is doing a disservice to the cause of tax collection and the feeling of trust between the Inland Revenue and the taxpayer, and is aiming another blow at the confidence that should exist between people and Parliament.

Mr. Joel Barnett: I hope that I may be forgiven if I say, in my customary, benign and moderate way, that I can find nothing in the Bill that has anything to do with what Opposition Members have been saying for the past hour or so. When I hear words such as "evil", "snoopers", "invasion of freedom", "odious provisions", and all the rest of it, I recall my moderate words in the House last night to the effect that some Members of the Opposition were being somewhat naïve.
These provisions are dealing with suspicion of a criminal offence—in other words, tax evasion. It has been said that there could be great abuse of these provisions by some inspectors of taxes. It has been said that as Chief Secretary I shall not be here for ever, and I happily go along with that view. But it does not matter who will be here as Chief Secretary or who will be the inspector of taxes concerned, because we have built into the schedule very adequate safeguards.
It is not a question of some inspector of taxes being able to walk, as has been suggested, into people's premises and to ask for documents as they think fit. That is not the situation and is not the schedule with which we are now dealing. There are considerable safeguards built into


the schedule to a much greater degree than in any other comparable legislation, including powers of search and entry. That includes legislation put on the statute book in earlier years by Conservative Governments when the right hon. and learned Member for Surrey, East (Sir G. Howe) was a Law Officer.
I hope that I may be forgiven for having some strong feelings about this matter when it is implied that I personally am putting these allegedly obnoxious provisions on the statute book. At earlier stages I heard arguments directed to making out a serious case and I sought to ensure that adequate safeguards were put into the schedule. As the Bill was originally drafted, one of the safeguards involved an inspector of taxes being required to obtain a search warrant from a magistrate. The criticism was levelled that that safeguard was inadequate. In general magistrates retain the power to grant search warrants in many other cases. I recognised the concern over this matter and tabled a provision to ensure that the safeguard was considerably strengthened. We sought to provide that before an inspector of taxes could obtain a search warrant, he had to obtain the authority of a circuit judge in England and of the appropriate authority in Scotland and Northern Ireland.
The hon. and learned Member for Dover and Deal (Mr. Rees) appeared to be implying that the circuit judges would issue search warrants at the behest of any odd inspector of taxes who said "I think that there are some documents in Joe Bloggs' house at No. 10 Joe Bloggstrasse." It is a nonsense to suggest that a circuit judge will issue a search warrant to any inspector of taxes who comes along to him in these circumstances. That is nothing like the situation. Everything that right hon. and hon. Gentlemen opposite have been saying has been a travesty of the truth. The circuit judge, under this provision, will have to be satisfied by the inspector of taxes, who will be on oath, that there is reasonable ground for suspecting an offence involving any form of fraud relating to tax.
I do not know why the hon. and learned Member for Dover and Deal should suggest that there is a hit and miss attitude here. It is ridiculous to assume that a circuit judge will say to any inspector of taxes "You want a search

warrant? All right, here it is." That is asking us to believe that circuit judges behave in a way which is somewhat unlike the way in which I would expect them to behave. Surely when the hon. and learned Gentleman appears before circuit judges in his legal capacity—

Mr. Peter Rees: I do not think that I have ever appeared before a circuit judge. Could the Chief Secretary tell us what standard of proof will be required for a prima facie case? Perhaps if he would direct his mind to that it would enable him to make a more constructive contribution to our debate.

Mr. Barnett: I try very hard not to get annoyed by the hon. and learned Gentleman's rhetoric, but sometimes it is very difficult. I accept that he has never appeared before a circuit judge and I understand now why he is not too well aware of a circuit judge's work. He can be assured that circuit judges will do a first-class job in these matters. He asks me what evidence they will require. They will require reasonable evidence for suspecting that tax evasion has been committed. The circuit judge is the man who will decide whether there is reasonable evidence, not the odd inspector of taxes. The circuit judge is a very responsible member of the legal profession, and the decision is up to him. Therefore, it is a nonsense for hon. Members opposite to talk about inspectors of taxes just walking into someone's home.
When an inspector of taxes does go to someone's home he will have obtained a search warrant from the circuit judge, and in addition he will have obtained approval from two members of the Board of the Inland Revenue Commissioners in London. That is a considerable additional safeguard. On top of that, the premises which can be searched are limited to those on which there is reasonable grounds for suspecting that evidence will be found.
Then again, only in the presence of a barrister or solicitor, will a search warrant be issued for the seizure of documents. Where the claim for professional privilege can be made, that claim will stand. If there is any doubt in that respect, I have given an undertaking that I will discuss the matter further with the Solicitor-General and the profession.


There is another safeguard in the provision which insists that lists shall be made of anything which is seized in the search.
I urge the House to put these powers into perspective and to abjure these exaggerated expressions which hon. Gentlemen opposite like to use from time to time.

Mr. Gow: Would the Chief Secretary tell the House to what extent he envisages that officers of the Board of the Inland Revenue will be given instructions in future about breaking into premises in accordance with the provisions of this Schedule?

5.45 p.m.

Mr. Barnett: They will be given firm instructions, as they are about any legislation. Hon. Gentlemen opposite misunderstand the way in which inspectors of taxes work. If they think that they will go to the commissioners of the board, obtain approval and then go to a circuit judge on some trivial tax evasion offence, they are very much mistaken. Almost entirely —in fact entirely—they will operate in this way only in cases of suspected major frauds. I have been asked how they will know that this situation exists. Anyone with experience about the way in which these things work will know that the inspectors frequently have information which leads them to believe that there are reasonable grounds for suspecting that there has been a substantial evasion of tax.

Mr. Graham Page: Would the Chief Secretary deal with the example which I gave? If the inspector thinks that there are reasonable grounds for believing that there are documents in the hands of an employee in the employee's house, in a case where there is suspicion that the employer is being fraudulent in his tax affairs, will the judicial authority be obliged to grant a warrant?

Mr. Barnett: Yes. But the circuit judge would have to be satisfied that there were documents on those premises and that there was reasonable suspicion of fraud. In these circumstances it would not be unreasonable for the circuit judge to give the warrant. The right hon. Gentleman also asks about the "terrible powers" to cross-examine widows, women

and children. I admit that I might be getting a bit tired, but perhaps he could point out to me some time where in the Bill there is any provision for an inspector of taxes to do that. As I read the schedule there is no such power.

Mr. Graham Page: This is a very important point. There are two other provisions in this schedule and, as I read it, once an inspector uses the powers to enter he can go on to use the powers to call for documents and to examine the people who happen to be in the house.

Mr. Barnett: With respect, the right hon. Gentleman has not answered my question. There is nothing in this provision as I read it which gives the Inland Revenue the power to interrogate or cross-examine anybody on the premises. The inspectors do not have any such powers under the search warrant which would be issued.

Mr. Graham Page: I am sorry to interrupt the Chief Secretary again, but this is most important. If the inspector enters under these powers, can he not carry out the powers given to him earlier in this schedule? It seems to me that he has complete power to cross-examine anyone on the premises.

Mr. Barnett: The right hon. Gentleman is very good on these matters and very assiduous in his reading. In fact I think he must have all these Bills under his pillow at night. But I wish he would point out to me anywhere in the schedule where such a power is given. I am sure he did not get this out of the Bill. Perhaps it is coming from on high. There is no power to question people anywhere in Schedule 6. I emphasise that again. One always knows when the right hon. Gentleman is on a bad point. If he is on a good point he quotes every word. The fact that he has not done so in this case indicates that he is on a bad point.

Mr. Younger: The Chief Secretary has unearthed a very important point. Will he confirm that when an officer enters a house under these provisions he will not be permitted to ask any other person —a wife or a child, for example—to produce documents and will not be allowed to ask them where the documents are or to interrogate them in any way? Is that what he is saying?

Mr. Barnett: I am surprised at the hon. Gentleman. We sat through 84 hours of Committee stage during which we read this schedule upside down and inside out at all hours of the night and morning. Any reading of that schedule would indicate that there are no powers to interrogate. We are talking about powers of search and entry to obtain documents. Nothing has been unearthed which was not already there. I am astonished that the hon. Gentleman should say that something new has been unearthed.

Mr. Ivan Lawrence: What is there to stop an income tax investigator asking questions anywhere of anybody about any possible tax fraud, provided that he warns them that what he may say may be taken down and used in evidence?

Mr. Barnett: The hon. Gentleman is a member of the legal profession. He should know that that has nothing to do with this schedule. An inspector of taxes can ask all kinds of questions on all kinds of other occasions, but there is no obligation upon anyone to answer him. For the last few months I have been asking the Opposition to explain what they have been saying, but I have had no answers.

Mr. Lawrence: The point is that there does not have to be any specific power under the schedule to entitle an inspector of taxes to ask questions arising from documents that he has found. The power already exists and therefore is dangerous because it is now to be used in respect of documents being found in consequence of this schedule.

Mr. Barnett: The hon. Gentleman should have a word with his Front Bench about this matter. It is absurd for him to suggest that all the other powers elsewhere in our tax legislation should be removed from the Inland Revenue and then to expect it properly to fulfil its duties. The hon. Gentleman is saying that the inspector of taxes obtains documents and later may ask questions related to them. Is he suggesting that an inspector of taxes, having secured the special authority to obtain the documents in a case of suspected tax fraud, should not be able to ask the questions he wants to ask? Does the hon. Gentleman suggest that that should be deleted from our tax legislation? Surely he is not being serious. We are here dealing only with the search and

entry powers in the case of suspected fraud. We have written considerable safeguards into the Bill. I find it remarkable that the Opposition, particularly the right hon. and learned Member for Surrey, East with his knowledge and experience in these matters, should want to remove that from the Bill.

Mr. Hooson: The Chief Secretary has dealt with the minor point but not with the major point. Any invasion of privacy is a serious matter. No one would grant that unless it were absolutely necesasry in the public interest. What he has not established or given any grounds for establishing is that it is necessary in the public interest.

Mr. Barnett: I accept that invasion of privacy is a very serious matter. However, powers of search and entry are scattered throughout our legislation without anything like the safeguards which are contained in this Bill. In most other cases search warrants are issued on the basis of a magistrate's warrant. They are issued to all kinds of different people —for example, on social security matters for very tiny sums of money much smaller than the kind of evasion we are talking about here—

Mr. Peter Rees: Mr. Deevy?

Mr. Barnett: I note that name and I am delighted to see that that man is in gaol. I hope that arising out of this debate the hon. and learned Gentleman will go along with me in seeing where there are similar tax frauds such people will also end up in gaol.
We need these powers because in certain cases it is very difficult, if not impossible, for inspectors of taxes to be able to follow through their suspicions and to obtain the necessary documents. I have already said that the Conservatives are being a little more than naïve in these matters. Anyone who has had anything to do with tax matters will know that there are circumstances of substantial tax evasion where documents exist but which are not available to the inspector of taxes.

Mr. Hooson: There must have been pressure from within the Inland Revenue for this power. That pressure must have been supported by evidence that in certain cases the power would have helped


to solve those cases. How many such cases were there?

Mr. Barnett: I indicated in Committee that after discussions with the Revenue our understanding was that in the main there would be a comparatively small number of cases in which substantial tax amounts were being evaded. On the other hand, because the powers will exist it is likely that taxpayers will know that the documents will have to be made available to the Revenue in certain circumstances, and that will help the Revenue to administer the tax and to collect the proper payment that is due.
I am as concerned as anyone not to introduce additional legislation to add to the invasion of the privacy of the individual. Equally, I want to ensure that these provisions will not be abused. With the substantial safeguards that we have written into the Bill, I am satisfied that there will not be abuses, and I therefore advise my hon. Friends to resist the amendment.

Mr. Ridley: I wish that I had a better knowledge of the history of the French Revolution. There must have been someone as charming and delightful as the Chief Secretary who played a prominent part in those events. I would not dream of mentioning names, but we are now at 15th July and today five guillotines have been erected in Parliament Square. The tumbrels will be rolling soon. Now we are discussing the knock on the door.

6.0 p.m.

Mr. Peter Rees: Perhaps the exact historical parallel is with the Abbé Sièyes who, when asked what happened to him in the Revolution, said "I survived". I suspect that the Chief Secretary has the same capacity for survival.

Mr. Ridley: My hon. and learned Friend has the advantage over me in historical matters. I am sure that there was someone like the Chief Secretary who said to the aristocrats as they rolled up in their tumbrels to the guillotine that there were adequate safeguards and that they were being naïve. That is a French word, which makes it all the more horrifically likely to be true. The Chief Secretary says that my hon. Friends are being naïve and that there are adequate safeguards, but in a few moments'

time the House will divide and he will get his measure on the statute book.
The Chief Secretary's answer is inadequate. I am not a lawyer, but surely there are already powers of search. It is possible for the police to obtain from a magistrate a warrant to search on production of evidence of fraud. When I was in the Department of Trade and Industry I looked at these procedures because when the company law inspectors suspected a company fraud the matter had to be put in the hands of the police, the police made an investigation, and it was so long before a search warrant was issued that the bird had flown.
That does not apply in this case. If a serious tax fraud is suspected there is no reason why the tax inspector should not go with the police and obtain a search warrant. Why are additional powers necessary? I suppose it depends on what we are looking for. The Chief Secretary said that we are looking for major, hard-core tax evaders. But who are these people who are so different that they cannot be treated under the existing powers? I suspect that they are not quite what we shall be looking for.
The part of the schedule which we propose to omit does not mention "hard-core" or "large-scale". There is no reason why the war widow who has failed to declare £10 investment income should not be investigated under these powers. There is no reason why the moonlight painter who has a hundred quid in grubby notes stuffed under the dresser should not be investigated. Although he is not hard-core and not operating on a large scale he comes within the schedule.
The judge will be bound to grant a search warrant if the inspector says that he has evidence that a certain war widow has £20 investment income which she has not declared and that he wishes to search her house to prove it. It is not for the judge to say whether that amount is worth looking for or whether she is the sort of person to whom the provision should apply. He has to have reasonable certainty that the evidence is sound, not that a large amount of money is involved.
I suspect that there is no intention to operate the provision in that way. The Chief Secretary says that he will not stay long in his job and that he is longing to get out of it. We can help him in that worthy ambition as soon as he puts the matter in


a wider context. I suspect that he does not intend to use the provision in that way. How wrong that is. We are told that it is a crime to evade tax. Yesterday the hon. Member for Colne Valley (Mr. Wainwright) said that the taxpayer's morale goes up every time a tax evader is caught. That applies only to the big ones. What about the moonlight painters? I know a fisherman who has never paid any tax.

Mr. Gow: What about the painters?

Mr. Ridley: That is a little unkind of my hon. Friend, especially as I have spent most of the moonlight hours in the House.
Will the schedule be used in a politically motivated way? That has always been my fear. The tax inspectors will go for some notorious character not because they need to find the evidence but because it will be a politically motivated public sacrifice. It will be like the French Revolution. Someone will be taken to the guillotine for political reasons. He may be connected with a famous company whose affairs have been recently in the news, or he may be a wart on the face of private enterprise. The ordinary person who has made a fraudulent tax return and has evaded paying his taxes is of no interest to the Chief Secretary.
A morality that goes for the big but not for the small tax evaders is shocking. It is straightforward political bias. What I find most offensive is the Chief Secretary's remark that the Government were not looking for ordinary people and would not use the powers to chase ordinary working people. Why not? Why not search their houses? If it is necessary for big evaders, why is it not necessary for small evaders? Why not go down the whole of Joel Barnettstrasse knocking on every door to see who has been moonlighting, who has been doing two jobs and who has a few pound notes coming in from an evening job? If that is the mentality, it should apply to everyone. That is why that cannot be the mentality. We cannot search everyone's house, and it would be wrong to do so. We should reject that approach.
If the Chief Secretary means to reject that approach, I am with him. We cannot spend time checking to see whether every citizen in the land is being honest by breaking into and entering his house. It follows inexorably and properly in logic

that if we cannot do that for every ordinary working man we should not do it for anyone, and we should not bend the law in a politically motivated direction, as the Chief Secretary, for all his blandness and charm, is trying to do.
In saying that there are adequate safeguards and that my hon. Friends have been naive, the Chief Secretary is trying to draw a curtain over one of the most iniquitous pieces of legislation that I have ever seen. It would be far better for him to say that he will withdraw this proposal. There is no doubt in my mind that the only people against whom this part of the schedule will be used are victims who, if caught, will provide spectacular news. It will not be used to enforce the payment of revenue by all citizens. It is a bad piece of biased legislation worthy of 14th July and the attitude of the French Revolution.

Mr. Nigel Lawson: I was grateful to the Chief Secretary for welcoming me to the Chamber at the beginning of his speech. I must confess that I would have been moved to speak even if he had not extended that welcome. This is a monstrous schedule. Our amendment seeks to reduce the monstrosity. The Chief Secretary made an astonishing speech. At no time was he able to produce any evidence to show that the powers he seeks are necessary. What he did—and this is interesting—was to say "We have written in these protections and safeguards." He went on in that vein for a long time, seeking the plaudits of the House.
Why are these safeguards, inadequate as they are, put forward? Such safeguards were not in the Bill originally. They are there only because of the pressures of Conservative Members. The Bill was introduced without any such safeguards or protections. The Chief Secretary has now admitted that they are essential. Having introduced the Bill without the safeguards he asks us to trust him with the schedule as it stands. That is impossible. The little good that there is in the schedule is there because of Opposition pressure. The right hon. Gentleman and his advisers—I do not exonerate them but I put the main blame, as is constitutionally proper, on the Chancellor and the Chief Secretary—have introduced something which is


totally offensive and inexcusable and which even the Chief Secretary at his most bland has been unable to defend.
We have asked on many occasions for the evidence which would prove that the powers sought by the Government are needed. At no time have we had an answer. It is true that there are tax evaders who are not caught. We regret that. Whatever the state of legislation there will always be criminals of one sort or another who are not caught. Is legislation to become more and more Draconian and tyrannical until we reach the state when there is not a single criminal who is not caught? That is a nonsensical proposition.
The Chief Secretary suggested in Committee that he needed these powers to enable him to discover the evidence which would prove that the powers were needed. That was the circular nature of his argument. He said that it was because the Government did not have such powers that they had been unable to discover evidence which would prove that the powers were necessary. That shows the circularity of the right hon. Gentleman's reasoning. The Minister of State piloted through Committee yesterday—the Orders are on the Order Paper today—a number of double taxation agreements with Fiji, Romania, Spain and Sudan. All of these agreements have exchange-of-information clauses. The Minister of State has conceded that any information obtained under the powers of Schedule 6 as a result of tax inspectors breaking and entering into premises and seizing anything they find there may be exchanged with the authorities of those countries.
In Committee I pointed out that as recently as last year the Inland Revenue had conducted a management review. The review addressed itself to all of the problems confronting the Revenue. One such problem, quite properly, was that of evasion. The conclusion reached by the review was that what was needed was more fully trained inspectors, not more powers. The review stated that there was a shortage of fully-trained inspectors. That may be true. That is no excuse for taking powers of this kind which are an affront to all those of us who take pride in living in a free society.
6.15 p.m.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) raised the point of all those who would be covered by this legislation. We are all equal under the law and everyone is liable to be covered by it. It is no use the Chief Secretary saying that this legislation is meant for only a small number of hard-core tax evaders. If the power is there it could be used against anyone and no doubt will be, as we see the VAT powers being used against anyone. The VAT powers are used against those who could not be described as hard-core evaders in any sense. They are no "Mr. Bigs" or whatever. It will be the same with these powers, except worse because many more people are liable to pay income tax than are registered for VAT.
My hon. Friend the Member for Cirencester and Tewkesbury mentioned moonlighters. The hon. Member for Tottenham (Mr. Atkinson) told the Committee that on his estimate, and he is an important financial authority, there was £3,000 million worth of undeclared income a year involved in moonlighting. This is big stuff, far bigger than any of the so-called hard-core tax evaders. Here is something which will no doubt attract the attention of the Revenue. As I said in Committee, this legislation is a case of the gauleiters in pursuit of the moonlighters. Any idea that the ordinary citizen can relax and feel that he has no need to fear because there are only one or two nasty people, about whom they read in newspapers and the Chief Secretary has them on his little black list and will deal with them with these powers, does so without foundation. These are powers to break into a person's private home, to seize anything which the inspectors may find, and they are taken in respect of every taxpayer in the land—without a shred of evidence that they are necessary.

Mr. Peter Viggers: One always hesitates to take part in a Report stage debate when Members are speaking with all the sophistication and knowledge that they gained in Committee. There are, however, two points that need to be made. The first is that the schedule seems to be exceptionally badly drafted. At the moment it reads:
If … there is reasonable ground for suspecting that an offence involving any form


of fraud in connection with, or in relation to, tax has been committed on any premises, or that evidence of the commission of such an offence is to he found there
That means that it is possible for an inspector to go to premises even if there is no evidence there but simply because he thinks that an offence has been committed on the premises, leaving no evidence. This is nothing more than prurience. What can be the purpose of the inspector's visiting premises where he suspects an offence has taken place if he has no reason to believe that there is any evidence of the offence remaining there? It is completely nonsensical, and deserves an answer.
The Government have been increasing taxation at an unprecedented rate. They have been tightening the screws so that many people are finding it almost impossible to pay taxation. They are being placed in a position in which they are tempted to try to avoid taxation. There is a narrow line between avoidance and evasion. The situation is so bad that we have reached the point where a Chancellor who threatened to soak the rich has tried to soak the war widows. With the help of one or two Government Back Benchers, the Conservative Party managed to relieve the war widow of some of her tax responsibility.
This is a weak Government, floundering about seeking ways of getting more tax into the net. It looks like a weak Government floundering about looking for help from a strong Executive. We are told that this provision is meant to attack hard-core tax evaders of a major nature. The Chief Secretary said just now "I think it will be used only in major cases." But that is not what the wording says. It does not say that it will be used only in major cases. It would be perfectly simple for an amendment to be made to the proposed subsection. If the Government wanted to use the provision only in major cases, they could simply add the word "major" in line 44, so that it would refer to "an offence involving any form of major fraud". But it does not say that. It refers to "any" offence. The result is that anyone can have his premises searched, subject to the safeguards that have been pointed out to us.
If it is major fraud that the Government are after, why do they not legislate accordingly? The Government ought

to bear in mind that the really major fraudulent tax evaders will be people who are perfectly capable of looking after their own tax affairs. They will always be prepared for a Government inspector to come along and look at their papers. The really hard operators, the sophisticated operators whom the Government claim to be after, are capable not only of employing accountants to manage their affairs for them but also of having enough intelligence to employ accountants in the Channel Islands, where I believe they are exempt from the provisions of the clause.
As is so often the case, the Government are seeking to close a loophole. They are using as an excuse for closing it the exceptionally bad cases, and missing the real target. They are missing the narrow target for which they should be aiming and are in danger of bringing in legislation that will subject everyone to the possibility of entry.
The Minister may think that we are making a great deal out of this, but, as his hon. Friends, among others, pointed out in the debate on war widows, a great deal of anxiety is and can be caused to people by the very fear that their premises may be entered. It is not the sophisticated operators, the big hard-core tax evaders of a major nature, with whom we are concerned here. We are not too bothered about them. We should Like the Government to have appropriate powers to deal with them. They probably have them already. We are concerned about people who, in their ignorance and uncertainty are afraid of the powers the Government are now trying to obtain. These are the people we are trying to protect. They will benefit if the clause is deleted.

Dr. Alan Glyn: This is a major incursion upon the rights of the individual. The Government have cited other instances in which similar powers may or may not exist, or powers which could be compared with what is sought here. But that is not the point. The point is that this is a major incursion, a change in the law which will, in effect, allow the breaking and entering of private premises for a particular purpose. It represents a very serious increase in the powers that the Government already possess in many other areas.
In order to justify the need for these powers, the Government ought to produce an absolutely cast-iron case. They ought to be able to say that they have evidence that unless they possess these powers they will be quite unable to catch a particular number of people who are believed to have committed major offences.
I am worried that the Chief Secretary was unable to say how many people he thought might be involved. He seemed to be saying that it was a few, but he was very vague. Is the number five, 50, 500 or 5,000 a year? These are the things we need to know. So far the information has not been supplied.
I should like to know how many people the Chief Secretary thinks he will catch in his net if these powers—even with the safeguards we have tried to put into them—are placed on the statute book. In other words, to what extent would this provision enable the Revenue to increase the number of cases of evasion brought against people?
But I am worried much more by two points already brought up, the first of them by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). He touched upon a cardinal point when he said that any new regulation or law must apply equally to all sections of the community and not just to one section. It must apply not only to the multi-millionaire but also to the moonlight worker or the person who is doing two jobs. It must apply universally.
The drafting of the clause enables inspectors to enter almost any premises, small or large, whatever the nature of the offence, small or large. But I genuinely believe that the clause is not being introduced for the purpose suggested. I believe that the purpose is much wider, and that the Government are looking much further ahead. I believe they are thinking in terms of a capital levy and various other measures, in relation to which an inspector may wish to enter people's houses in order to see whether they have any Rembrandts or Titians, and what is the nature of the furniture.
This is a major change in the law, and it ought first to be applied to everybody.

If the safeguards that we managed to insert in the Committee stage are included, as undoubtedly they will be, the provision is still one that I do not regard as necessary. In fact, I believe it to be highly undesirable. In the wrong hands it could be very dangerous indeed in eating into the rights and privileges of the ordinary citizen who is living peacefully in his home, with no intention of committing fraud or anything else.

Mr. Bruce George: When I came into the Chamber one and a half hours ago I had no intention of speaking, for a number of reasons. One is that I believe the Finance Bill should be left to specialists. Another is that three weeks after I last criticised the Inland Revenue, I received a demand for £150. I am not suggesting that there is any correlation between criticism of that sort and being chased by the Inland Revenue, but certainly this experience has led me to show some hesitation in opening my mouth on such matters.
But, having listened to the debate for the last one and a half hours or so, it would appear that no group of criminals has had its case espoused with such eloquence and vehemence as I have heard during this period.
We are talking in some cases of people who have committed and are committing criminal acts. It has been said that this legislation, if it goes through, will be a major incursion on the rights of individuals. But surely one can be guilty in this House of having dual standards. We have read much recently in the newspapers about fraud committed by ordinary working people. Many Conservative Members have been falling over themselves in condemning ordinary working people, who are accused in many cases of defrauding the social services.

Mr. Lawson: Mr. Lawson rose—

Mr. George: I believe that anyone who defrauds social security deserves to be apprehended. I hope that such persons will receive a very stiff sentence, and not simply a fine. If the nature of the crime merits it, such people must be sent to gaol. Almost all hon. Members on both sides will agree with that. But I cannot accept that there should be one standard of treatment for people who defraud social security not of £30,000


but, often, of £10 or £20, and that they should be pursued with the utmost rigour of the law, but that in the case of full-scale fraud, where people have defrauded the State of millions of pounds—sums of money well in excess of anything stolen by the Great Train Robbers—we have to close our eyes.

6.30 p.m.

Mr. Lawson: The hon. Gentleman says that these powers are taken only in respect of criminals. That is not so. They are taken in respect of those who are suspected of crime, which is a very different matter.
As for the hon. Gentleman's reference to dual standards, in order to establish that he himself has no dual standards, does he suggest that these powers of breaking into and entering premises should be applied in the case of suspected illegal immigration?

Mr. George: The hon. Member talks of "breaking and entering". I am not aware that this legislation will allow hordes of policemen or income tax inspectors to knock down doors or climb through windows. They will have to go through a process of law in respect of which the Government have, in my opinion, made far too many concessions. The Minister has spoken with kid gloves on about the way in which these alleged criminals are to be treated. Inspectors will have to go to a county court judge. In many ways, this group of criminals will be treated much too fairly.
There are many people who are guilty of displaying double standards. People are defrauding the State of millions of pounds, yet their case is put forward as if to defend them is to defend the sacredness of the constitution. If we are to pursue people as rigorously as, for example, DHSS inspectors do, we should have comparable standards in pursuing other classes of criminals.

Dr. Glyn: The whole point of the argument of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) is that what applies to one must apply to another. However, the Minister made it clear that he was prepared to use this power only in major cases. That is the distinction.

Mr. George: The Minister said, I think, that it would not be used just in cases of major fraud. However, I am not on the Treasury Bench and, therefore, I cannot speak for the Government.
I draw a comparison between the rôle of income tax inspectors and that of wages council inspectors who are given very few powers to protect people working in wages council industries. When wages council inspectors seek to check the records of people whom they suspect of committing criminal acts, very often the records disappear.
It is very amusing to hear that we should not pursue these people on the Sabbath. If people commit criminal acts, they should be searched out on any day of the week. Is it suggested that the police may go into a council estate and interview people suspected of criminal acts only between Mondays and Fridays? If that were the case, it would allow people to take appropriate action to avoid investigation.

Mr. Graham Page: The hon. Gentleman's remarks have been addressed to the entry of the premises of suspected criminals. However, this clause goes a great deal further. Any premises may be entered, not merely those of an alleged criminal. Any premises may be entered if there happens to be a suspicion that there is some piece of paper there which will help uncover some fraud.

Mr. George: They will not find much in my house. They are very welcome to come.

Mr. Lawson: What about the £150?

Mr. George: I hope that the Minister does not give way to the blandishments of the Opposition. There are millions of people outside this House who would recoil in anger if they felt that we were succumbing to the pressures of Opposition Members, some of them accountants, and others of them who know how to find their way round our legal system. There are millions of honest working people who would recoil in anger if they felt that there was one set of standards for them and another set for other people.
In this country, there are two types of crime. There is ordinary crime and there is what is often described as "middle-class crime". Those who commit middle-class


crimes are treated very differently from people who commit ordinary crimes, such as stealing small sums of money. They are pursued vigorously by the police. But there are many crimes about which we say "This is not really crime at all". I refer to people who defraud the work force, where there is an attempt by the wages council inspectorate to pursue them. It is not regarded as crime. The same applies to tax evasion and tax avoidance. In many cases, we are inclined to smile benignly and say "Well, everyone does it, anyway."
I welcome what has been done by the Government. I am reassured that the liberties of the individual will not be destroyed as a result of the enactment of this schedule. I feel that if we are to condemn people who defraud the State we should not defend those who blatantly defraud the State in the way that we have heard today.

Mr. Cecil Parkinson: I am sorry that we have not heard more from the hon. Member for Walsall, South (Mr. George). However, I suspect that right hon. and hon. Members on the Treasury Bench are relieved that he has not been here more often. He has had two effects on our debate. There is no doubt that he has livened it up, but, what is more important, he has encouraged a number of my hon. Friends to feel that we have not really made long enough speeches or punched hard enough, if there are still hon. Members in the House who can make speeches of the kind that he did, having listened to the debate.
The Revenue argument and the Treasury argument on Schedule 6 and the new Section 20B are based on three assertions. The first is that the Revenue is severely handicapped at present. I shall tell the hon. Member for Walsall, South straight away that this is not the only power that the Revenue has. It has very substantial powers already for pursuing the taxpayer and for making sure that we all pay our taxes. The idea that the Revenue has managed to put about that, somehow, it has been fighting for the past few years with one hand tied behind its back, that it is hopelessly handicapped in its dealings with the taxpayer, and that all the cards are stacked against it, does not bear examination.
In Committee, I said that I was one of the trustees of a fund known as the Taxpayer's Defence Fund. It was established for one simple reason. It was established because the Revenue has tremendous resources at its disposal and is accordingly in a position almost to blackmail the taxpayer into settling a claim, because the taxpayer knows that he has not the resources to carry on the fight. The Revenue is not inhibited about taking a case to the House of Lords, whereas, for the individual taxpayer, the cost is prohibitive. Many taxpayers settle claims against them not on the basis that they are just or sensible but on the basis that they dare not pursue them further, because they could run into substantial costs which, in addition to the tax involved, are likely to be such as to deter them from proceeding further. The fund was established in an attempt to redress the balance, so I hope that the hon. Member for Walsall, South will think a little further about this and realise that at present the scales of justice are weighted very heavily in favour of the Inland Revenue. I hope that the hon. Member will not believe, as he seems to, that it is the Revenue that needs protection from the individual taxpayer. If there is a need for protection, it is very much the other way.
The second assertion is one that has been made by various people, including Mr. Cyril Plant. It is that hundreds of millions of pounds of taxes drift past the eyes of tax inspectors, and they cannot get their hands on them. We have no way of knowing whether that assertion is true, any more than Mr. Cyril Plant has. If he can really quantify it, he should be chasing the people who should be paying it. But no figures have been produced to say that there are hundreds of millions of pounds of unpaid tax. The reason is simple. If the Revenue could pin down the sum involved with the precision that Mr. Cyril Plant pretends he can, it should be out getting it—otherwise it is making an assertion based not on any knowledge of facts but simply on suspicions.
The third assertion is the one that the Chief Secretary uses regularly, which is that we are after only a tiny handful of people. Here, I agree with him. But I am not in favour of one law for the tiny handful and another for the rest. We are all equal before the law. In any


event, that assertion does not time in with Mr. Cyril Plant's view. Is Mr. Plant really suggesting that a tiny handful of people are robbing the Revenue of hundreds of millions of pounds? The two things do not make sense. If there are hundreds of million of pounds involved, it is obvious that many people are in the evasion business and that these powers will not be used, as the Chief Secretary says, against a tiny handful of people. They will be used against much more than a tiny handful of people if they are to produce the return that the Inland Revenue claims will result from their use.
The Chief Secretary's honeyed words about a tiny handful of major evaders and the Inland Revenue's assertion that the powers will enable them to collect hundreds of millions of pounds do not hang together or make sense.
There is a strong feeling among taxpayers, underlined by some of the speeches at the annual conference of the Inland Revenue Staff Federation, that we have an increasingly politically-motivated Inland Revenue. Some of those speeches indicate that the Inland Revenue regards itself not only as part of a bureaucracy but as developing powers that it ought to have to produce the sort of society in which it believes. We are beginning to see a strong, politically-motivated Inland Revenue at a time when we have a weak and gullible Government.
The Chief Secretary has steered through this House some terrifying powers for the Inland Revenue. Last year's legislation on transfer prices gives the Revenue almost unbelievable powers. If a person is not suspected of being a criminal, but is carrying on the same business as a suspected criminal, the Inland Revenue can go through his books to get a better idea of the sort of amounts they should be charging a person whom they regard as guilty. The Revenue can assert its right to go through the books of an innocent taxpayer and use any information found there to persecute someone else. The attitude of the Revenue is that if it finds something to use against the innocent taxpayer, that is a bonus and its good luck.
Under Schedule 6, children can be compelled to give evidence against their parents. The Chief Secretary resisted an amendment yesterday which provided that

children under 16 should not have to give information. The Inland Revenue says that this power is necessary to enable it to do its work. Does the hon. Member for Walsall, South think that children should be compelled to give evidence against their parents?
Under this schedule accountants and lawyers can be compelled to break professional confidences and betray their clients to the Inland Revenue. A person seeking advice in the preparation of a defence against the Inland Revenue takes his life in his hands if he goes to a lawyer. That lawyer could be put under an obligation to hand over any evidence made available to him by his client. Does the hon. Member for Walsall, South believe that it is proper for the Revenue to demand and get a situation in which professional confidences and relationships can be undermined? The schedule also gives the Inland Revenue the power—with safeguards that we have obtained—to invade the privacy of a person's home.
Does the hon. Member for Walsall, South give his blessing to a schedule that sets children against parents, enforces the betrayal of professional confidences and gives the Inland Revenue power to invade people's homes on reasonable suspicion that it might find something on the premises?
Schedule 6 is a case of massive legislative overkill. The Inland Revenue has identified a tiny nut and has asked the Chief Secretary for an enormous hammer with which to crack it.
An ever-stronger, more ambitious and rapacious Inland Revenue is taking advantage of the fact that we have a weak Government to take to itself powers which no sensible and strong Government would allow it to have.

Sir G. Howe: By leave of the House, I shall reply to the debate. I was prepared earlier to acknowledge that there was some chance that the Chief Secretary, having made so many changes in this provision as it was disastrously introduced, might be able to persuade us that there was a case to be made in its defence. Having heard the way in which the right hon. Gentleman has brushed aside the fundamental complaint—the presence of tax inspectors and Inland


Revenue officials with a roving commission in the privacy of a person's home—I am convinced that our opposition to this clause throughout has been abundantly justified.
The right hon. Gentleman has failed to understand the real complaint. There was a moment when I thought that this provision had been slipped in by another Treasury Minister who had inadvertently allowed himself to be put upon by importuning from the Inland Revenue while the Chief Secretary's back was turned, and that the right hon. Gentleman was acting in a sort of automatism and did not know what he was doing—that he was guilty, but insane. But it is worse than that. The right hon. Gentleman did know what he was doing.
This is a profoundly unattractive and dangerous clause. It is no use saying that it will be used only against a small, hard core of offenders. It is available for use against a wide range of people, including the moonlighting painters to whom my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) referred, and against all those in the classes referred to by the hon. Member for Walsall, South (Mr. George). I shrink from the suggestion that this provision will enable us to catch middle-class criminals. This attitude may underline the thinking that brings the clause before us. If so, that makes it all the more dangerous.
This kind of clause is the inevitable consequence of a society in which tax rates have been allowed to go far too high and become far too widespread in every kind of social and private activity. Citizens who were prepared to pay their due obligation are being driven by the intemperance and extremity of tax legislation into resisting and avoiding it.
The antithesis of that is the worrying attitude of some staff in the Inland Revenue. I do not seek to denounce all those who work in the Revenue. Many of them must be horrified at some of the things being uttered on their behalf by Mr. Cyril Plant and his friends. A report of the Inland Revenue Staff Federation annual conference is headlined:
Why the tax men are clamouring for all-out war".
A society in which officials, who are acting on behalf of us all in raising revenue im-

posed by Parliament, consider themselves to be conducting an all-out war with the taxpayer is becoming an unhealthy society. Mr. Cyril Plant, who has played such a dominant part, has gone far beyond his representative rôle as the leader of people exercising a quasi-judicial duty and holding the balance between taxpayer and the State. These are not people who should be mobilised into a course of all-out war. How would hon. Members opposite feel if the judiciary were being mobilised into an all-out war against any class of society? Our society would be in peril.
It is said that only one in 20 of the self-employed admits to earning as much as £60 a week. This is the premise of Cyril Plant's case. It follows that the many self-employed who, in his eyes, admit to less are to be regarded as potential criminals—the middle-class criminals, to whom reference was made. Mr. Plant said:
'We know that they are lying' … his eyebrows bristling with indignation. 'Do they think that we are mugs? The man who pays PAYE, and that means most people in this country, doesn't get away with anything like that'.
Here is the division between the PAYE earners and the rest who are regarded as prima facie liars by this representative of the Inland Revenue Staff Federation.
There are other even more disturbing features. The report continues:
'Our critics condemn the proposed powers of search. Why? They will be used sparingly and with discretion and I don't care if the warrant is signed by a judge or Father Christmas, as long as it gives us the powers we need. It is all to do with the deterrent factor, too. If dodgers realise that we can put them under the microscope, and go to their banks they might be more truthful in future. What's so wrong about trying to make people tell the truth?'.
Here are echoes of language that we had not expected to hear in this country: "We have methods of making people talk."
Mr. Plant is the Chairman of the TUC. The Chief Secretary to the Treasury mutters ominously that I must be careful what language I use.

Mr. Joel Barnett: I did not say that. I said that the kind of language that the right hon. and learned Gentleman was using about the Chairman of the TUC was the same kind of language as he used about trade union leaders generally.

Sir G. Howe: No. The Chief Secretary must face the gravamen of our complaint. These words are not merely being uttered by a representative of those who collect the taxes, but by the Chairman of the TUC. He is urging that course of action on a Government who place so much store on the co-operation of the TUC. Those are the standards by which we must judge whether it is right to place these powers in the hands of the Revenue.
My hon. Friend the Member for Cirencester and Tewkesbury was afraid that these powers would be used in a political sense. The observations from the Government gave some substance to that fear. I refer to the pursuit of those committing middle-class crime.
However, another observation is reported. Another delegate to the conference said that many respected pillars of society were nothing more than tax criminals. Do we not see there the attraction of being able to winkle out a respected pillar of local society as an example so as to deploy the deterrent factor proposed by Mr. Cyril Plant against the millions of people whom he believes to be lying? It is by those standards that we must judge whether we should give these powers to the Inland Revenue.
The Chief Secretary said that those powers may only be exercised after judicial authority has been given, and that that amounted to a proper safeguard. But the safeguard is not one in respect of which the taxpayer may be heard. The application on a formal affidavit will be made to a judge in chambers before starting his ordinary business, among many other routine applications. By the application of summary judgment an ex-parte writ will issue. No one will be there to argue against it. There is no certainty that even the most conscientious judge will protect us from a well set out affidavit or an amply deployed affidavit which says "I have reason to believe that the taxpayer may have certain documents in his house." What may a judge say in face of that? The statement is made on oath. It presents a prima facie case. The judge will have no alternative. There may well be a genuine belief.
Millions of people who may be subject to these powers may have a warrant issued

in respect of their homes on a bare statement on oath. The statement may be genuinely believed, but that will not be a substantial safeguard. The interposition of the judge will not provide a substantial safeguard. He will only need to say "Is the affidavit duly set out and signed?"
The Chief Secretary says that we are talking nonsense when we refer to the right to question the taxpayer in those circumstances. However, on entering the premises with a warrant the officer may seize and remove anything found there which he has reasonable cause to believe may be required as evidence.
Let us consider the cases, reported in the Press, of the way in which the VAT men exercise their powers. This is not a gentle visit by one well-mannered, smartly clad tax inspector looking gently for documents. Six or seven people at a time will spend from seven to 10 hours in the home of the citizen, opening, as we have seen with the VAT men cases, the satchels of children going to school and the handbags of mothers on their way to work. Is it to be supposed that for seven or eight hours at a time the Inland Revenue officials will be doing that in total silence?

Mr. Neil Kinnock: They may be singing the "Red Flag".

Sir G. Howe: At the present rate of progress, they might.
We must face realities. The citizen may have a group of people in his house for hours at a time. They will certainly not maintain a stolid, stoic silence. As the Chief Secretary conceded, the Revenue officials may ask as many questions as they like. They are under no duty to warn the citizen that he may not reply. They will be around the house saying "What is this? What is that?" For hours at a time the citizen will be faced with a visitation of that kind and, according to the euphemism to which we must look forward, will be helping the Revenue with its inquiries. The questioning power of the Revenue officials will be exercisable in the home of the taxpayer as soon as the warrant has been issued. The officials will be in the person's home for as long as they like and will have powers of search which are as wide as they like.
The Chief Secretary purports to recognise that we should not give those powers


lightly, but he does not recognise the extent of what he is doing. If we are to move away from the necessity for this kind of odious legislation we must try to draw back from a society where tax rates are so high. The Revenue officials feel themselves to be at war with the taxpayers. There is no prospect of correcting the position if the Government

remain in office, piling tax upon tax, and tyrannous power upon tyrannous power.

I invite my hon. Friends to vote against the Government amendment and to support the Opposition amendment.

Question put, That the amendment be made:—

The House divided: Ayes 160, Noes 151.

Division No. 252.]
AYES
6.58 p.m.


Abse, Leo
Fraser, John (Lambeth, N'w'd)
Park, George


Archer, Peter
Garrett, John (Norwich S)
Pavitt, Laurie


Armstrong, Ernest
George, Bruce
Ferry, Ernest


Ashiey, Jack
Golding, John
Phipps, Dr Collin


Atkinson, Norman
Graham, Ted
Prentice, Rt Hon Reg


Barnett, Guy (Greenwich)
Grant, George (Morpeth)
Richardson, Miss Jo


Barnett, Rt Hon Joel (Heywood)
Grant, John (Islington C)
Roberts, Gwilym (Cannock)


Bates, Alf
Hamilton, W. W. (Central Fife)
Robinson, Geoffrey


Benn, Rt Hon Anthony Wedgwood
Hardy, Peter
Rodgers, George (Chorley)


Bennett, Andrew (Stockport N)
Harper, Joseph
Rooker, J. W.


Bidwell, Sydney
Harrison, Walter (Wakefield)
Roper, John


Boothroyd, Miss Betty
Hayman, Mrs Helene
Rowlands, Ted


Bottomley, Rt Hon Arthur
Hooley, Frank
Sandelson, Neville


Bradley, Tom
Huckfield, Les
Sedgemore, Brian


Brown, Robert C. (Newcastle W)
Hughes, Robert (Aberdeen N)
Selby, Harry


Brown, Ronald (Hackney S)
Irvine, Rt Hon Sir A. (Edge Hill)
Shaw, Arnold (Ilford South)


Butler, Mrs Joyce (Wood Green)
Irving, Rt Hon S. (Dartford)
Sheldon, Robert (Ashton-u-Lyne)


Callaghan, Rt Hon J. (Cardiff SE)
Jackson, Colin (Brighouse)
Shore, Rt Hon Peter


Callaghan, Jim (Middleton &amp; P)
Janner, Greville
Short, Mrs Renée (Wolv NE)


Carter, Ray
Jay, Rt Hon Douglas
Silkin, Rt Hon John (Deptford)


Carter-Jones, Lewis
Jeger, Mrs Lena
Silkin, Rt Hon S. C. (Dulwich)


Cartwright, John
Johnson, Walter (Derby S)
Silverman, Julius


Castle, Rt Hon Barbara
Jones, Barry (East Flint)
Skinner Dennis


Cocks, Michael (Bristol S)
Kerr, Russell
Small, William


Coleman, Donald
Kilroy-Silk, Robert
Smith, John (N Lanarkshire)


Colquhoun, Ms Maureen
Kinnock Neil
Snape, Peter


Conlan, Bernard
Lamborn, Harry
Spearing, Nigel


Cook, Robin F. (Edin C)
Lamond, James
Stallard, A. W.


Corbett, Robin
Lestor, Miss Joan (Eton &amp; Slough)
Stewart, Rt Hon M. (Fulham)


Crawshaw, Richard
Lipton, Marcus
Stoddart. David


Cronin, John
Litterrck, Tom
Strauss, Rt Hon G. R.


Crosland, Rt Hon Anthony
Luard, Evan
Thomas, Mike (Newcastle E)


Crowther, Stan (Rotherham)
Mabon, Dr J. Dickson
Tierney, Sydney


Cryer, Bob
McCartney. Hugh
Tinn, James


Cunningham, G. (Islington S)
MacFarquhar, Roderick
Tomlinson, John


Davidson, Arthur
MacKenzie, Gregor
Torney, Tom


Davies, Bryan (Enfield N)
Madden, Max
Walker, Harold (Doncaster)


Davies, Denzil (Llanelli)
Mallalleu, J. P. W.
Ward, Michael


Davies, Ifor (Gower)
Marks. Kenneth
Watkins, David


Davis, Clinton (Hackney C)
Marquand, David
Weetch, Ken


Deakins, Eric
Marshall, Jim (Leicester S)
Weitzman, David


de Freitas, Rt Hon Sir Geoffrey
Maynard, Miss Joan
White, Frank R. (Bury)


Dell. Rt Hon Edmund
Mendelson, John
Whitehead, Phillip


Doig, Peter
Mikardo, Ian
Whitlock, William


Dormand, J. D.
Miller, Dr M. S. (E Kilbride)
Willey, Rt Hon Frederick


Douglas-Mann, Bruce
Morris, Rt Hon J. (Aberavon)
Williams, Alan (Swansea W)


Ellis, John (Brigg &amp; Scun)
Mulley, Rt Hon Frederick
Williams, Alan Lee (Hornch'ch)


English. Michael
Murray, Rt Hon Ronald King
Williams, Rt Hon Shirley (Hertford)


Evans, Fred (Caerphilly)
Newens, Stanley
Wise, Mrs Audrey


Evans, Ioan (Aberdare)
Ogden, Eric
Woodall, Alec


Ewing, Harry (Stirling)
Orbach, Maurice



Foot, Rt Hon Michael
Orme, Rt Hon Stanley
TELLERS FOR THE AYES:


Ford, Ben
Ovenden, John
Mr. James Hamilton and


Forrester, John
Owen, Dr David
Mr. Thomas Cox.


Fowler, Gerald (The Wrekin)
Palmer, Arthur





NOES


Atkins, Rt Hon H. (Spelthorne)
Braine, Sir Bernard
Davies, Rt Hon J. (Knutsford)


Bain, Mrs Margaret
Bryan, Sir Paul
Dodsworth, Geoffrey


Beith, A. J.
Buck, Antony
Douglas-Hamilton, Lord James


Bell, Ronald
Butler, Adam (Bosworth)
Drayson, Burnaby


Berry, Hon Anthony
Channon, Paul
Dykes, Hugh


Biggs-Davison, John
Clegg, Walter
Emery, Peter


Blaker, Peter
Cockcroft, John
Fairbairn, Nicholas


Boscawen, Hon Robert
Cooke, Robert (Bristol W)
Farr, John


Bowden, A. (Brighton, Kemptown)
Cope, John
Finsberg, Geoffrey


Boyson, Dr Rhodes (Brent)
Costain, A. P.
Fletcher-Cooke, Charles


Bradford, Rev Robert
Crawford, Douglas
Forman, Nigel




Freud, Clement
Marten, Neil
St. John-Stevas, Norman


Fry, Peter
Mates, Michael
Scott, Nicholas


Galbraith, Hon T. G. D.
Maudling, Rt Hon Reginald
Shaw, Giles (Pudsey)


Glyn, Dr Alan
Meyer, Sir Anthony
Shersby, Michael


Godber, Rt Hon Joseph
Miller, Hal (Bromsgrove)
Silvester, Fred


Goodhew, Victor
Mitchell, David (Basingstoke)
Sims, Roger


Goodlad, Alastair
Moate, Roger
Smith, Dudley (Warwick)


Gow, Ian (Eastbourne)
Molyneaux, James
Speed, Keith


Grieve, Percy
Montgomery, Fergus
Spicer, Jim (W. Dorset)


Grimond, Rt Hon J.
Morgan, Geraint
Spicer, Michael (S Worcester)


Hawkins, Paul
Morgan-Giles, Rear-Admiral
Stanbrook, Ivor


Hayhoe, Barney
Morris, Michael (Northampton S)
Stanley, John


Henderson, Douglas
Morrison, Charles (Devizes)
Steel, David (Roxburgh)


Higgins, Terence L.
Morrison, Hon Peter (Chester)
Stewart, Ian (Hitchin)


Holland, Philip
Neave, Airey
Taylor, Teddy (Cathcart)


Hooson, Emlyn
Nelson, Anthony
Tebbit, Norman


Hordern, Peter
Neubert, Michael
Thomas, Dafydd (Merioneth)


Howe, Rt Hon Sir Geoffrey
Newton, Tony
Thompson, George


Howell, David (Guildford)
Nott, John
Thorpe, Rt Hon Jeremy (N Devon)


Howells, Geraint (Cardigan)
Onslow, Cranley
Townsend, Cyril D.


Hurd, Douglas
Page, Rt Hon R. Graham (Crosby)
Trotter, Neville


James, David
Paisley, Rev Ian
Vaughan, Dr Gerard


Jessel, Toby
Parkinson, Cecil
Viggers, Peter


Johnson Smith, G. (E Grinstead)
Penhaligon, David
Wainwright, Richard (Colne V)


Johnston, Russell (Inverness)
Percival, Ian
Wakeham, John


Kellett-Bowman, Mrs Elaine
Peyton, Rt Hon John
Walker, Rt Hon P. (Worcester)


Kilfedder, James
Powell, Rt Hon J. Enoch
Walker-Smith, Rt Hon Sir Derek


Kimball, Marcus
Price, David (Eastleigh)
Weatherill, Bernard


King, Tom (Bridgwater)
Prior, Rt Hon James
Wells, John


Kirk, Sir Peter
Pym, Rt Hon Francis
Welsh, Andrew


Lamont, Norman
Raison, Timothy
Whitelaw, Rt Hon William


Lane, David
Rees, Peter (Dover &amp; Deal)
Wiggin, Jerry


Langford-Holt, Sir John
Renton, Rt. Hon Sir D. (Hunts)
Wigley, Dafydd


Lawrence, Ivan
Renton, Tim (Mid-Sussex)
Wilson, Gordon (Dundee E)


Lawson, Nigel
Rhys Williams, Sir Brandon
Winterton, Nicholas


Lewis, Kenneth (Rutland)
Ridley, Hon Nicholas
Younger, Hon George


MacCormick, Iain
Ridsdale, Julian



Macfarlane, Neil
Rifkind, Malcolm
TELLERS FOR THE NOES:


MacGregor, John
Roberts, Wyn (Conway)
Mr. Carol Mather and


Macmillan, Rt Hon M. (Farnham)
Ross, Stephen (Isle of Wight)
Mr. Spencer Le Marchant.


Madel, David
Ross, William (Londonderry)

Question accordingly agreed to.

Mr. Joel Barnett: I beg Ito move Amendment No. 75, in page 126, line 46, leave out from 'committed' to and 'in line 48 and insert
'and that evidence of it is to be found on premises specified in the information'.
This amendment was put down following an undertaking I gave to the hon. Member for Braintree (Mr. Newton) in Committee.

Mr. Graham Page: I want to ask one question in respect of this amendment. During the course of the previous debate the Chief Secretary said that where the search warrant was issued there would have to be reasonable grounds that a crime or fraud had been committed on the premises. I think that was a slip of the tongue, because, by this amendment, those words have been moved out of the original draft so that the alleged crime does not have to have been committed on the premises; there merely has to be a document, or some other thing, on the premises which may be evidence of the fraud. I think it was a slip of

the tongue on the part of the Minister. I hope I am right.

Mr. Barnett: With the leave of the House, Mr. Deputy Speaker, as I recall, I was actually reading from the legislation when I was dealing with the point raised by the right hon. Member for Crosby (Mr. Page). I actually quoted from the section. I assure the right hon. Gentleman that if I made a slip it was a slip of the tongue, because I was seeking only to quote from the section that has now been amended in this way.

Mr. Graham Page: The Chief Secretary read the words that were printed in the Bill as drafted and that are now removed by this amendment, so that it is not a case of a crime having to be committed on the premises; it is a case of the documents having to be there before the warrant is issued.

Mr. Barnett: We discussed this matter in Committee, when the hon. Member for Braintree made this point and I undertook to look at it in order to see if I could put an amendment down to meet that point. This amendment does just that.

Amendment agreed to.

Mr. Joel Barnett: I beg to move Amendment No. 76, in page 127, line 1, leave out 'he' and insert
the authority'.
This again is a purely drafting amendment that was referred to in Committee, when I undertook to look at it.

Amendment agreed to.

Mr. Younger: I beg to move Amendment. No. 78, in page 127, line 2, at end insert:
accompanied by a police officer'.
This amendment enables us to examine, I hope not too lengthily, but very importantly, the most sensitive and critical moment that will take place as a result of what the Government are introducing in this schedule—that is, the moment at which the tax inspector arrives, armed with his warrant, at the front door of a house that he intends to enter and search. I do not think it needs very much imagination for hon. Gentlemen to visualise the mountain of difficulties that could arise in a situation like that. Let us think of a house in which there is an occupier, or his family, who is apparently suspected of being involved in some tax fraud and the Inland Revenue officer arrives at the front door to enter that house forcibly and take away documents or other evidence that he may find. I ask hon. Gentlemen to think briefly about what is likely to happen.
We know, from what the Chief Secretary has said—although we on the Opposition side of the House may take it with a pinch of salt—that this will be a very rare event, which will arise only in a mere handful of cases. According to the Chief Secretary's assurance we are not talking about thousands and thousands of cases; we are talking about a small number of important cases that the Inland Revenue will decide to proceed against with the approval of a circuit judge. But we have to recognise that because of the way the Government have drafted this schedule the officer may have to gain admission to the house by force.
I wonder how much thought the Chief Secretary and other Ministers have given to what that means. We have an Inland Revenue officer, who may have no experience in these matters, arriving, pos-

sibly for the first time in his life, to gain entrance to a house by force. How will he do it? Will he break in the door? Will he break the window and climb in through it? How will he effect entry? He will have to use his best endeavours, within what the schedule allows him to do, to try to obtain entry by force, but in all probability he will do considerable damage.
7.15 p.m.
There is also the question of who may be in the house. It may be the occupier, whose documents the tax officer is trying to get, or it may be the occupier's family. It could perfectly easily be acquaintances, relations or friends of the occupier. Is there likely to be argument? It does not follow that the person in the house at the time will know that a warrant has been issued and that an officer will arrive. It may be said that the person suspected of tax fraud might have reason to know that something of this sort would happen, but there is no reason to think that the man's son or daughter, or his uncle or aunt, or friends, or anyone else in the house, should know.
This is another perfect field for dispute, argument and difficulty. The person in the house, whether it is the occupier's brother or someone else, may feel obliged to offer some resistance. What will happen if force is used to try to prevent the inspector getting in, if he is caught climbing in through the window? What will happen if the occupier tries to throw him out again? What will happen in any subsequent case, involving assault or dispute of one sort or another?
It is no use our saying that this will not happen. It is implicit in the Bill that this sort of thing will happen. What about access to the documents? A person does not just walk into a house and find a large notice labelled "Documents", or an arrow showing where they are. The inspector will have to search the house.

Sir G. Howe: I cannot even find my own documents.

Mr. Younger: My right hon. and teamed Friend says that he cannot even find his own documents. I am sure that he is being unduly modest. This is a very worrying point. I ask hon. Gentlemen who may take this lightly to bear in mind what it would be like if someone


came to search their homes. I wonder how many hon. Members have had someone search their home? I am glad to say that I have not, but it is an unpleasant and nasty experience when it happens. If the inspector has to rifle various chests throughout the house to try to find the documents there will be an unfortunate possibility of a dispute taking place.

Mr. Paul Hawkins: I have not had my house searched in that sort of way, but being in another Government's possession at a certain time, for four or five years, I have often had my room and my possessions searched. It is a most unpleasant experience, whether one is a prisoner of war or a private citizen, to have one's belongings turned upside down. It can undoubtedly result in many other things being disturbed or destroyed. It cannot be justified. I believe it right that this fact should be drawn to the attention of the Government.

Mr. Younger: I am grateful to my hon. Friend for that telling description of what it can he like. Plainly, it is distressing in the circumstances that he outlined, but I ask all hon. Members to think what it would be like if such a thing happened in one's own home.
What happens if the documents are suspected of being in a piece of furniture that is locked up? What happens if the person in the house at the time genuinely does not know where the keys are? I think that I am probably in much the same position as my right hon. and learned Friend in this respect, because it is quite likely that I do not know where keys are. What happens if there is a filing cabinet, which the inspector wishes to open but which cannot be moved to opened? Is the inspector entitled to extend his powers of force, beyond entering the premises, to the forcing of locks and using equipment to open such things as filing cabinets? I shall not labour the point. I hope that I have said enough to show that these events are extremely likely—indeed, certain—to create genuine difficulties.
Next, there is the question of what is to be removed. The schedule makes it clear that not only documents but anything whatever may be removed if it is suspected of containing information about tax fraud. That includes furniture.

A person suspected of tax fraud may have been buying and selling antique furniture, or the like, over the permitted level of value, and he may be suspected of failing to declare it. Will the inspector be empowered to remove chairs and tables, priceless ornaments, vases and pictures? If he does, what is likely to be the reaction of the people in the house?
With all those matters in mind, one must agree that the situation I have described, which is always likely to arise, will be extremely difficult. The inspector may not have any previous experience of work of this sort, but he will have the duty of breaking into a house to remove documents and other things.
I shall not go further into the question of what the inspector is entitled to do by way of asking questions of the people in the house. That matter was inadequately discussed earlier, and the Chief Secretary was extremely muddled about it. I do not think that he had the faintest idea what would happen, or whether the inspector would be able to demand of a person in the house that he or she should give him information about where documents were. We had no clear answer about that, but, as it was ventilated at least to some extent in the earlier debate, I shall not go into it now.
Since all the difficulties that I have outlined are very likely to arise, it is essential that someone of responsibility other than the two parties to the farce being carried on in the house should be present. One has only to think for a moment of the scope for dispute later on. As one of my hon. Friends later earlier, in any dispute afterwards it would be the private citizen, without massive resources, but trying to get justice out of the legal machine, against the Inland Revenue, with, in these circumstances, unlimited resources, both legal and financial, fighting the case against him.
What will be the position of the householder if, in his submission, lots of pieces of furniture and equipment have been damaged? How will he have a chance of proving his case in a claim for damages if it is just his word against that of the inspector, or his word accompanied by that of his wife or perhaps his family who may be suspected of being on his side?
The point of the amendment is that there should of necessity be a police officer present who, with his customary efficiency, will be able to take notes and act as a confirmer or otherwise of any later allegation regarding charges of damage or matters of dispute. Dispute can arise in many ways—I have not outlined them all—and if we are to allow this to happen at all we should at least try to minimise trouble at a later stage.
I submit, therefore, that the presence of a police officer is essential. He can give corroboration later if there are charges of one kind or another. To a great extent, he will understand the rules of evidence, and so forth, and he can be of immense help later, in reducing areas of dispute. Also, he can help in getting Justice for the person whose house is broken into.
I stress the need for help for the citizen to get justice because—the Chief Secretary ignored this earlier—it is quite possible that, in the end, the occupier of the house will turn out to be entirely innocent of fraud. That may be unlikely, but it is perfectly possible. The warrant is given on suspicion, and it is therefore possible that the person concerned will be shown to be innocent.

Mr. Graham Page: The proposed section as it stands allows entry into premises of a person who is not even accused of the alleged fraud but is perfectly innocent. He could be the employee of someone accused of fraud.

Mr. Younger: I was concentrating on the person suspected of fraud, but my right hon. Friend is absolutely right. Any other house may be entered, and the person we are talking about may be entirely innocent.
If a police officer were present, at least there would be someone there of authority, someone universally respected both by the law and by the public generally, and he would be able at least to help to see that justice was done.
My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) pointed out to me earlier that, as a Scot, I should ask for two police officers, and I believe that two would be necessary under Scots law. However, I leave that to the Chief Sec-

retary to put right if he accepts the spirit of the amendment.
I hope that the Chief Secretary will put behind him the disputes we have had about whether these powers are desirable in general—we have already argued that—and address himself genuinely to the practical problems. Even if we accept the need for these powers, those problems are bound to arise as a result of their implementation. If the right hon. Gentleman refuses to recognise what is likely to happen, he will do a great disservice to a lot of people who may find themselves quite wrongly put to damage, inconvenience and expense, with very little means of redress. It is essential that a police officer should always be present.

Mr. Harry Selby: We have been listening to a stout defence of the Englishman's home as his castle. I suppose that that applies to Scotsmen and Irishmen.

Mr. Nicholas Fairbairn: To some of us.

Mr. Selby: To the hon. and learned Gentleman of course.
I cannot remember a stout defence being put up, or the same arguments being used, when it was proposed, when we were discussing the affairs of Northern Ireland, that people should be detained—detained for two days and then for a further four, on suspicion. I cannot remember you taking the same line then. Of course, the crime is of a different kind, but, as the Roman poet Junius said, a precedent once established becomes accepted, and you have accepted a precedent that certain things can be done.

Mr. Deputy Speaker (Mr. Oscar Murton): Order. The hon. Member must address his remarks to the Chair, but not in that fashion.

Mr. Selby: Hon. Members opposite have accepted a precedent that such things can be done.
The law of Scotland requires corroboration, but I do not think that it would require another policeman. One policeman, if it should be agreed there should be one, would be enough, because there would be someone else there as a


witness, but the point is that hon. Members opposite are putting up a case and drawing distinctions between crimes of different kinds, suspicion having been aroused. They have accepted the precedent in one field, and they should accept it in another.

Mr. Lawrence: I hope that a non-Scotsman may enter the debate. I support the amendment so superbly moved by my hon. Friend the Member for Ayr (Mr. Younger), and I do so for this reason. The presence of a police officer would do something to allay public fears about the operation of this legislation.
The schedule leaves a bad taste in the mouth. I believe that it leaves a bad taste in the mouths of Conservatives, of my hon. Friends who have been striving so valiantly against its introduction, and that it would leave a bad taste in the mouths of the vast majority of hon. Members on the Government side if they would stop to consider what they are doing. It will leave a bad taste in the mouths of people generally in the country who support one side of the House or the other. They will feel that something pretty distasteful has happened if we allow the schedule to pass.
7.30 p.m.
We have reached a stage in our society when people, not just Conservatives, are beginning to say "What on earth is happening to us when the tentacles of the law and the operations of the State are reaching out into every facet of our existence and life?" Of course, the law must pursue people who break it, but for generations there has not been the right—except in exceptional circumstances—which is now being grotesquely extended for the forces of the Executive to go into somebody's home. That threat to the sanctity and privacy of the home is the essence of what will be distasteful to the overwhelming majority of people. Not only may an innocent person have his door broken in and his privacy invaded but, as the public outside will come to realise, if they have handled somebody else's papers they themselves may be involved, even if they are neither criminal nor even suspect.
I give credit to the Chief Secretary for accepting the urgings of my hon. Friends to introduce safeguards. I would rather

a circuit judge than a lay magistrate decide whether a warrant should be issued. However, the safeguards do not safeguard the liberty or the privacy of the individual, nor do they safeguard the sanctity of the home. All they will ensure is that as far as possible the procedures voted by Parliament are being properly observed. Those very procedures may themselves be bad and objectionable.
Those involved by this provision will not be just those who in due course will be accused of serious crimes: there will be pressure against the measure being used only to attack those concerned with big tax frauds. There will be pressure from all over. People will say "If it is to apply to the big boys, to the upper or middle classes, and the successful business men, what about the small business man and the working man with his moonlight job?"
It would be fair but impracticable for the provisions of Schedule 6 to be enforced throughout the population because there are not, and never will be, enough Inland Revenue officers to operate them across the wide spectrum of our society.
When the door is opened or knocked down by an inspector, the person inside will want immediate assurance that such events are in accord with the rules of our society. Such people will only be reassured if they see the uniform of a police officer. In my practice I have frequently appeared in court for people who have assaulted police officers in plain clothes. They have properly said, with probably more justification than the courts give them credit for, "I did not realise that the person who was seizing or assaulting me was a police officer". In evidence, the police officer will say that he told the man that he was a police officer. But, when people are excited or irritated they often do not react with cool judgment. That is particularly so when their homes are invaded by strangers. They will not be able to see the difference between an authorised person and an unauthorised person coming into their home. In many homes in this land the reaction to a stranger coming in through the door will not just to say "Go to hell". The usually cool British person may well react when his home is invaded—with force, or perhaps with violence, and certainly with


scant consideration for the authorisation of the stranger.
If I were sitting in my lounge at night and the door were kicked in and a stranger entered, I would not say "By what authority, pray, have you entered my house? Will you show me your authorisation?" I would leap to my feet and seize the nearest piece of furniture, and I would be forgiven for behaving in a violent manner against anybody who had thus gained entry. But, I would hesitate if that door went down or I went to the door in response to the ring of a bell and were confronted by a uniformed police officer. The eye moves faster than the mind. There is, thank heaven, still a respect for the uniformed policeman in our society.
The Chief Secretary will do his case, rotten as it is, more good by preserving something of the visual element of law and order in this grotesque power which is to be given to people who have never, in the history of this land, had such a power. He would do better to accept the amendment. Even unpleasant things, done peacefully, are better than unpleasant things done unpeacefully.
It is common sense and unanswerable to say that these powers should be used in the presence of a policeman. The Inland Revenue would surely welcome, from the bottom of its heart, the protection that a uniformed police officer would give its inspectors.

Mr. David Mitchell: The amendment should be seen in its context as part of a group, all of which have the purpose of trying to build safeguards into the discreditable powers that the Government are seeking. I join wholeheartedly with my hon. Friends in wishing to remove those powers, but as we have reached a stage where they are seen to be inevitable we should seek to impose reasonable limitations to protect people.
Amendment No. 74 starts the process by saying in effect that there should not be entry for a pettifogging amount, that £100 or more should be at issue. Amendment No. 77 calls for independent witnesses, and Amendment No. 81 calls for the provision of a list of the items taken. I am glad that the Government have partly taken that case on board. Amend-

ment No. 82 provides that the items taken should be copied and returned within seven days, that the premises should be left secure, and that any loss should be made good. That amendment was discussed two nights ago, when we were told that there would be a reply later, and this appears to be the proper time. It ties up with Amendment No. 78, which deals with the police being present at the time of entry.
The Chief Secretary looks puzzled. If he turns up Hansard he will discover that I have correctly described what happened. The amendment was discussed with VAT inspectors' powers. We perhaps did not expect it to be grouped in that way, but it was, and the Financial Secretary said that there would be a reply later.
My hon. Friend the Member for Ayr (Mr. Younger) spoke about the situation when the inspector comes. Many people are at work during the day. I think of the small business man whose wife perhaps looks after the accounts. One example is a restaurant. I think of that because there was a case involving the VAT inspector in North London recently. As nobody would be at home during the day, one might expect the Inland Revenue to wait until the evening. By then the family might have gone out again, leaving a baby-sitter with their child. Imagine a teenage girl alone with the baby when there is a knock on the door by a strange man. She has been told to let nobody in. If the Chief Secretary has children, as I expect he has, he must have told baby-sitters that umpteen times. I have done so on many occasions.
I have a teenage daughter who goes baby-sitting from time of time. We invariably tell her that if a stranger comes she is not to let him in. What will the terrified girl do in the situation I have described? If there is a policeman there she will know that it is all right not to follow the instructions she has been given.
We can also imagine a householder going out and leaving his wife alone. Suddenly a man appears, producing a warrant. She will perhaps not be as terrified as the teenage girl, and will answer the door, but she will never have seen a warrant before. I have never seen one. Many people could go around with


phoney warrants. However, she would recognise the local policeman and know that everything was in order. If the policeman does not have to be there, there will be impersonations.

Mr. Fairbairn: How on earth will it be possible to impersonate a Revenue official?

Mr. Mitchell: The diversity of Revenue officials revealed in some newspaper articles of recent months certainly appears to make them people whom it is not possible to identify as people of a particular style or type or in other ways recognisable.

Mr. Robert Cooke: My hon. Friend can be certain that our hon. and learned Friend could never be taken for a Revenue official of any kind, shape or form.

Mr. Fairbairn: Thank God for that!

7.45 p.m.

Mr. Mitchell: A second possible situation is that of someone in a house who does not wish to give access to a person who seeks it. There could be many reasons. A man might not wish to be found in certain embarrassing circumstances. He does not see the warrant, but he sees someone breaking in or coming up the drainpipe, and gives him a push. There will be a breach of the peace. But if a policeman is present he will say "This is the law. I had better open up."
Thirdly, we should take into account the situation where the house is empty because the householder is on holiday. The Bill gives the Inland Revenue licence to break and enter people's homes in their absence. How is it to be done? Do Revenue officials smash a window or put their shoulder to the door, or do they jemmy the door open and in doing so smash the timbering around the lock? The Chief Secretary laughs, but there is nothing funny about this.

Mr. Joel Barnett: I was not laughing at anything the hon. Gentleman said.

Mr. Mitchell: There is nothing funny about what the Bill permits officials of the Inland Revenue to do to a private person's home. If the right hon. Gentleman's colleagues are so ashamed that they are not here to support him, and if he sniggers, it is a disgrace.
Inland Revenue officials are not trained in housebreaking. They will do a bad job, unless the Minister sends them to Dartmoor for training courses with the professionals. If not, it will probably be the first time they have ever done any housebreaking, and they will do it clumsily. Having searched the house, they cannot lock it again because they have broken the lock or smashed the window. The police are used to dealing with property which is found not properly closed, but unless the Government accept the amendment there will be no police there.
The householder's insurance policy will De invalidated if the house has not been properly locked. The householder who innocently went on holiday will find his house broken into by the Inland Revenue and left open for others to enter and take his goods and chattels. Who will be responsible when there is a claim? As the Solicitor-General has been sitting here quietly throughout the debate, I hope that he will advise us whether the Inland Revenue will make good the loss in such circumstances, especially if the householder is found to be innocent, as he will in many cases.
The debate has highlighted some of the inevitable consequences which the Government perhaps did not appreciate when they started on the dangerous path of introducing the concept that, as in an Eastern European country, officials should be able to break into people's homes.

Mr. Fairbairn: The Government, and especially the Solicitor-General, should understand the full implications of the schedule, which seem to me to go much further in law than perhaps is understood. In both England and Scotland extremely limited powers of entry are granted to the police and certain statutory bodies, such as the electricity and gas authorities and the Post Office—for example, to search an employee's premises to see whether he is storing letters stolen from the mail.
There are many cases in which criticism has been made of abuse of these powers, where they have been used for purposes outside their limited extent. In fact, the powers granted to police officers are extremely limited. They may obtain a warrant to enter premises to arrest someone, or if they can establish that they have reason to believe that there are stolen goods on the premises. However,


they have limited powers, which have to be exercised with extreme caution and under proper authorisation.
Let us consider the powers that are being granted under the schedule against the background of the criminal law. I believe that to be the background against which we should consider them. All that needs to be said before the sheriff in Scotland, or the circuit judge in England, is that there is reason to suppose that Mr. A. has committed an offence and that evidence of that fact will be found on the premises of Messrs. B to Z. If that is said on oath, that is all that needs to be said. The judge has no capacity to test it. There is no evidence; it is purely an affidavit.
The person who puts such a statement before the judge may be wrong. It may be that he merely has a hunch. But that will be enough. That is all he needs to do. All that any official needs to say on oath to the judicial authority is "I believe there is reasonable ground for suspecting that an offence involving a form of fraud"—it may be any form of fraud in connection with or in relation to tax—"has been committed". It may have been committed by any citizen. It may be any form of fraud by any citizen in relation to tax.
If there is reason to believe that one's great grandmother has a dog and has not paid the dog licence, that is enough. That is because it is in relation to tax. If there is reason to believe that the dog lived two days after the licence expired, that is enough. Let us be clear about the extent of these evil powers.

Mr. A. P. Costain: Will my hon. and learned Friend clarify the position? What happens if the dog bites the inspector?

Mr. Fairbairn: Even under a Socialist Utopia dead dogs do not bite. Indeed, Socialist dogs are allowed only one bite. If that fails, the dogs can be shot. They lose their licence once they have had their bite. If it is a Left-wing dog, it is shot. However, if it is a Right-wing dog, it may have another go.
Let us be clear about the extent of these powers. The inspectors can go in if they think there is reasonable ground for suspicion. Presumably these powers could be

used by the Post Office authorities if they thought that someone did not have a television licence, or if they were told that one's grandmother, uncle, mother-in-law or next-door neighbour did not have a licence. Apparently that is enough under these powers. That is enough to suggest that evidence of the commission of such an offence may be found.
Let us be clear about the effect of these powers. A Revenue official may well say "He could not live in this grand way if he were not cheating." What is the evidence? It is enough to go into the premises if it is believed that on entering them the official will find three-piece suites and grandfather clocks that the individual could not have afforded if he had been honest. Indeed, a warrant can be issued to permit entry within 14 days from the date of issue so that the premises may be searched.
We are not talking about the limited powers that are possessed by police officers; we are talking about officials who will have total powers to do anything they want. There is no restriction on their powers. On entering premises with a warrant the official may seize and remove any documents or property that he likes. He may say to himself "I rather fancy this place. We will get a furniture van and remove the whole lot." He may say to the owner "Look, old chap, I think you have been fiddling your tax," or he may suggest that the uncle, mother, partner or friend has done so. He may continue "I shall strip your house of furniture unless you tell me what I want to know, true or false. I will make you sign a statement. If not, I have authority to take every object out of your house that I can see. I have a warrant and I believe that an offence may have been committed." That is the extent of the powers.
I know that Treasury Ministers and the Solicitor-General will be anxious to say that that is not the intention, that it is not the manner in which the powers will be used. They may well say that it would not occur to anyone that such an abuse of power could result. Why not? Why do we have such extremely close scrutiny and control of the powers of the police? After all, they are the people who are entitled, in certain circumstances, to intrude into the privacy of the citizen. Why do we hedge their powers so carefully? It is because we know that the individual citizen, particularly a subsidiary individual,


is not capable of exercising such general power responsibility unless he does so under total restraint.
That is why my hon. Friend the Member for Ayr (Mr. Younger) and I have suggested that there should be two policemen. We have two policemen in Scotland, to ensure that one checks the other, and not only for corroboration. One officer's account of what he did in Mrs. Smith's house when he had a warrant to search it is given in the knowledge that Constable Bloggs was with him. He has to remember that he may give a different account. That forces each officer to be truthful. But the Inland Revenue official may go along to a house alone and afterwards give an account of what he took, how he got in, what was said to him when he tried to enter, whether the door was slammed in his face, whether the dog was set upon him, and whether he broke the china on the sideboard before he snatched the letters on the mantelpiece—and his evidence will not be supported.
Let us consider the position of the Revenue official. Is he not entitled to protection? Let us consider the honest Revenue official who goes to the house of a spiv. There may be one person in the house, or there may be 10. If there are 10 the official's position will be more difficult. He may say "May I look through your papers to see whether I can find accounts of extravagance that indicate that you have an income greater than that which you have declared?" Those in the house may set about him or burn the papers in front of him. If the official gives that account, what is his protection? What is the protection given to Mrs. Snodgrass?
What happens, as my hon. Friend the Member for Basingstoke (Mr. Mitchell) said, if the baby-sitter says "Do you know, the man stole a clock, took a watch and removed some knives from the kichen cabinet?" In fact, the girl may have taken them herself. She may have thought that if some lout was entitled to break in and take what he wanted, there was no reason why she should not do the same. She may have wondered why she should not take something for herself. What protection is given to the official? The answer is that he has no protection.
If we are to give people a general power to behave as anarchists in other people's homes, if we are to give them the power to take the curtains, carpets, silver, paintings and furniture, and if we are to allow them to take fingerprints and ask questions and put them under no restraint in law, surely it is right and sensible that a uniformed police officer should be present when such invasions occur.
8.0 p.m.
I know that Treasury Ministers and the Chief Secretary are anxious to allege that these powers will be used on only select occasions, against the big fish, but I find that concept offensive. If there is a law, it must be a law for everybody. I could send the Treasury—and perhaps I shall do so—a list of 100 people who do a moonlighting job in the evenings. I should like to see the Treasury use these powers, but it would not do so because the people whom I have mentioned are not the kind of people the Treasury want to get at. If there is to be a selective law, which involves giving to Inland Revenue officials powers that no police officer in the land possesses under any circumstances, the least we can do is to bring in somebody who is impartial and who does not begin with the kind of prejudice that Inland Revenue officials may display. Such a person should be present to ensure that there is a check on the behaviour of the other.

Mr. David Mitchell: My hon. Friend said that Revenue officials would have more powers than the police. Will he say how true that is, and in what way it applies?

Mr. Fairbairn: If a policeman obtains a warrant to search my house, his search is restricted to the matters with which he is concerned. For example, the warrant will say that the police have reason to believe that on, say, 15th October 144 tins of Kit-e-Kat were taken from the Co-operative store at such-and-such an address, to whatever road it may be, and that the police have reason to believe that some of the proceeds are to be found at such-and-such premises. Therefore, all the police can take away with them are so many tins of Kit-e-Kat and nothing else. But under the provisions in this Bill they can take away


with them documents, furniture or belongings. They do not even need to account for them.
Secondly, the police are not entitled to question any person under warrant in that house as to the source of any item that is or is not in that house. Again, Treasury officials are not subject to that kind of control. It is obnoxious that we are here giving wider powers to these officials than we give to trained criminal investigation officers. In other words, we are giving these powers to those who may have a hunch or a prejudice about what is taking place.
It would be extremely bad if the premises of every moonlighter were to be invaded and that person were asked to explain what he or she was doing. Many houses in the West of Scotland have traditional carpets, connected with Queen Elizabeth, or furnishings that are products of Clydeside. It is not difficult to find them. Are those houses to be invaded on the basis of fraud or the obtaining of benefit rather than that those people should be taxed upon them? The extent of the anarchy opened up by the schedule gives these powers to such people.
Let us not forget the question of balance. We have the legislature, the Executive and the judiciary. Let us also remember that the constabulary is given certain powers to protect us against the Executive and to protect the State against the wrongdoings of the citizen. This proposal will give omnipotent power to members of the Executive without any check or recourse in law.
I do not know what the law of England is in these matters, but I should have thought that there are many circumstances in which, if a Revenue official were to take other things found in a house which was not the property of the people who were suspected of any tax fraud, they would be guilty of a criminal offence.
I have been involved in many cases in which there have been allegations of how police officers have acted when searching private houses in Scotland by proceeding under a restrictive warrant. I shudder to think what would happen if powers without those restrictions were to be handed to officials who act under resentment or spite.
If I were to give advice to professionals in Dartmoor, it would be that they should obtain a typewriter, head the paper with the words "Inland Revenue", and set out the following message: "I hereby have a warrant to search your house because of suspected tax fraud." One could break into any house with the aid of such a warrant, and very few people would have the wisdom to question the warrant or to defend the sanctity of their property.
These provisions are a charter for the invasion of property—indeed, a charter for what otherwise would be criminal offences. They may well involve the removal of property merely on suspicion. This will put the criminal law into the hands of Revenue officials and it will also give criminals an opportunity to break into any house they desire.

Mr. Viggers: I wish to support what has been said by my Opposition colleagues on this vitally important matter. We must consider these provisions very carefully, because the Government appear to be pushing and shoving through legislation, and in this context disputes may occur, arising from the time of entry of inspectors into houses. Furthermore, disputes could arise over the circumstances of entry or as a result of the inflicting of damage at premises. There could be violence or the allegation of it—and allegation of violence is as important in these circumstances as is the violence itself.
Tax inspectors presumably are trained in tax matters. Policemen are trained in observation and in the meticulous recording of circumstances. They are also taught how to deal with violence and, indeed, how to avoid it; they are trained to de-escalate violence. They are experts in their own way. If a person locks himself out of his house or his car, he has only to call a policeman and entry into that house or car will be effected in the most efficient way. I spent five years in a solicitor's office, and I never found the police to be other than tactful and diplomatic. Police officers normally arrive in uniform, and that in itself is a protection for the individual. We deplore the invasion of privacy, but there are a few cases when it is necessary and those cases usually involve the entry of police officers.
We have heard about the excuses that may be put forward when somebody comes along to search a house for tax purposes. We must remember that there are 2 million people in this country who have difficulty in reading, to the extent that they are not capable of understanding what is set out on an official-looking document. Anybody can flourish a piece of paper and claim to be a tax inspector. Circumstances have occurred in which people have claimed to be social security inspectors and have thereby gained entry into houses for fraudulent purposes.
Disputes that may arise out of entry to houses are legion. These were pointed out very effectively by my hon. Friend the Member for Basingstoke (Mr. Mitchell). If anyone broke into my house when no one was there the burglar alarm system would automatically call the police. It would be much better, therefore, to have a policeman present at the time of entry.
If inspectors enter a house when there is no one there, they will make a search and leave. Undoubtedly, they will leave the house in circumstances that will not be the same as those which existed when they entered. The owners will come back find their house has been entered and call the police. The police will not know about the tax inspectors. But if a policeman is present the inspector's visit will be recorded in the day book at the police station and the police will have a report on the way in which the inspectors went in, and whether they took anything.
Under the Bill's provisions the inspectors have an obligation to make a list of the things that are removed from the house, but who is to say, if the house has been entered, whether the items were taken by the tax inspectors officially, by the tax inspectors unofficially, or by another burglar who broke in after the tax inspectors left? Who will know? I am not suggesting that tax inspectors will remove items illegally, but such allegation may be made.
This legislation is aimed at the big-time operators, the hard core of those who get around the law, and no doubt they will hire lawyers to make allegations that the inspectors behaved improperly. Therefore it is crucial that the tax inspectors themselves should be protected against this kind of allegation.
There is no great problem about this amendment if the Chief Secretary intends, as he says he does, to use this legislation only in rare cases of major fraud. This is a litmus test of Government intention. If they intend it to be used rarely they should not mind a policeman being present on the rare occasions when a search is made. Perhaps that situation will occur a couple of hundred times a year, and will involve about 300 or 400 police man-hours, which is no problem at all. But if it is their intention to use these powers broadly and make entering a house a matter of frequency, they will oppose this amendment. This is a clear test of Government intention.

8.15 p.m.

Mr. Hawkins: I was appalled to read of this legislation being introduced at all. I was appalled to think that inspectors of taxes should be empowered to enter people's homes. But having got beyond that point the Chief Secretary, who I believe to be a reasonable man, must see our point of view.
In the countryside and in isolated areas—and I have 120 villages in my constituency—we have had a spate of burglaries, and only last week on television and in the newspapers the police were appealing to householders not to let people into their houses. There has been an outbreak of bogus inspectors going around our district, getting into places and stealing from elderly people particularly. What is a person alone in a house to think when someone who is not in uniform arrives with a piece of paper and demands to come into his home? In the countryside it is more than likely that the householder will have a biggish dog, and it is very likely that he will feel that he might be attacked, so he will set the dog on the person concerned. The most extraordinary things could flow from this legislation. There is a real danger to the inspectors, and the posibility of many other disagreeable happenings.
It is quite wrong to introduce this law into our land, but if we are to have it, I believe that a policeman should go along with the tax inspector. There are many people in my area who are frightened to open the door to an ordinary civilian unless someone has phoned them beforehand. There are many isolated farmhouses where this sort of thing occurs.
I beg the Minister to consider this very carefully. It would be very helpful to the tax inspectors themselves if a policeman were present. My hon. Friend the Member for Basingstoke (Mr. Mitchell) raised the case of the householder who comes back from a fortnight's holiday and finds that he has had a visit from the Inland Revenue. But how does he know that the invasion came from the Inland Revenue rather than from a burglar? Is it envisaged that the tax inspectors should leave behind a visiting card saying "This house has been broken into by an Inland Revenue inspector from King's Lynn. Please ring the phone number below in the event of anything being missing."?
I believe that a policeman should be present to take a note of anything that is taken and to make sure that the Inland Revenue inspectors leave a receipt behind with the householder showing what has been taken away, otherwise there could be disputes leading to bodily harm, and that will create more and more trouble between the law and the law-abiding citizen. I say "law-abiding" because in many cases the suspect will be proved totally innocent.
I was a magistrate, and when the police came to me for a signed warrant I was always very worried about it because they could never give the particulars of what they expected to find. In this case, if all I have heard is correct, they can, in fact, take anything away and it does not have to be named in the warrant.
I urge the Government to think again about this matter, particularly in respect of people living in the country. I suspect that country dwellers will resent it greatly, and probably it will lead to many breaches of the peace, unless the police accompany the tax inspectors.

Mr. Gow: When we debated this schedule upstairs there was an air of incredulity about the Chief Secretary's attitude. He did not believe that anything could possibly go wrong with the straightforward operation of the powers given under Schedule 6. But there is a real prospect, indeed I would say a certainty, that things will not go just as the Chief Secretary envisages.
There are four specific powers in this schedule which are conferred upon inspectors of taxes—people with no training, ex-

perience or guidance in the task being given to them under this schedule. These powers are the power to enter, to search, to seize and to remove. It is true that under the Bill as drafted the only one of these four powers which can be exercised specifically by force is the power to enter.
Here we come upon a defect in the Bill. If there is a power to enter premises by force it seems extraordinary that there should not also be a power to search by force, to seize by force and to remove by force. Perhaps the Chief Secretary will say whether the power extends into these areas.
I believe that at least one police officer should be present for the protection of these unfortunate officers of the Board of Inland Revenue. I disagree with my hon. Friend the Member for Ayr (Mr. Younger) in one respect in that his amendment does not say that the police officer should be in uniform. I believe that to be necessary. I know that the Chief Secretary will dismiss my hypothesis, but there will be claims against officers of the Inland Revenue for wrongful removal of property and for damage done to property. To subject such an officer to that prospect without the presence of a police officer or someone else to corroborate his account of the proceedings is to do him a grave injustice.

Mr. Viggers: One other possible allegation could be made, which is that the evidence which is in due course produced by the inspectors may be said not to have been removed from the premises at all, and that would be the first line of defence by a less than scrupulous lawyer instructed by a less than scrupulous client.

Mr. Gow: In cases such as this it is possible that the Inland Revenue will send one of its officers to break into a house at night on his own. He may not be able to manage it on his own. He may need a chum to give him a leg up. That chum could well be a policeman. Suppose that the Inland Revenue officer was of the physical stature of the Chief Secretary. Suppose also that the occupant of the house in question was of the stature of the hon. Member for Rochdale (Mr. Smith). How would the Chief Secretary like it, at the dead of night, possibly with snow falling and icicles forming on the drainpipes, with his spectacles misting


up, to have to break into a house owned by the hon. Member for Rochdale? Yet it is just precisely that duty that the Chief Secretary is laying upon these wretched Inland Revenue officers.
Does not the board have enough problems without having to climb up drainpipes at the dead of night? I wonder whether the Chief Secretary and the Treasury Bench live in the real world, because that is the real world. To impose this additional burden upon officers of the board, men who are already fearfully overburdened and who are used to going through files usually six or seven years out of date, to take them out of their grimy offices and to send them up drainpipes at the dead of night, is being unfair to them.
It does not stop there. Quite often, officers will arrive at a house with a warrant hoping to be able to seize documents, but they will find the owner away. The house will be occupied by squatters. That is almost always the case now. One can hardly go home at the weekend without finding squatters in one's house. Suppose that you arrived home, Mr. Deputy Speaker, after a long and arduous session in the Chair listening to the kind of remarks we have heard from the Government Front Bench today, and find the squatters are there. I suppose that you would go to your mother-in-law's house. But the Inland Revenue officer would ring the doorbell at your house. The squatters would probably think that it was another hippie coming to join the commune. Instead, he would say "I am from the Board of Inland Revenue". There are girls in the Gallery and therefore I will not suggest what sort of a comment the inspector might receive when he knocks on the door. It is unkind to expect inspectors to go into hippie communes in this way.
It does not stop there. The dangers to which inspectors will be exposed are limitless. The Chief Secretary has not understood that the officer of the Board of Inland Revenue—thanks to the rates of taxation imposed by the Government, he is not the most beloved citizen in the land—will be in real danger because of the squatters, and because of the three or four bandit-sized men inside the house he intends to search. For these reasons it is unfair to send the officer there on his own.
There is another temptation which we have to recognise. If an officer of the Board of Inland Revenue breaks into a house to seize documents, he might be tempted. Supposing he sees lying on the dining room table, in the drawing room or in the study some silver, he might be tempted. If he were accompanied by a policeman, he would be protected against that temptation. It may come as a surprise to the Government Front Bench to hear that officers of the Board of Inland Revenue are human beings subject to temptation. They should not go on their own, they do not want to go on their own and they should have the protection of the police.
I hope that the Chief Secretary will accept the amendment, which is designed to protect the citizen—who is entitled to be protected—and the luckless officers of the Board of Inland Revenue, who do not want these powers, do not want to be sent climbing up drainpipes and should be allowed to get on with their huge backlog of work.

8.30 p.m.

Mr. Joel Barnett: I apologise to the hon. Member for Eastbourne (Mr. Gow) if my face indicated impatience with him. It is simply that when I hear a joke of this nature for the twenty-ninth time I get the feeling that I have heard it before and I do not find it quite so funny. The exaggerated examples which have been given are a little out of keeping with the seriousness of the subject matter of the debate. What we are talking about is nothing like as amusing as hon. Gentlemen would have us believe, and the exaggerated examples they have given are unlikely to arise in practice.
We are talking about a man or woman who is suspected of evading tax—a tax fraud, a criminal offence—and an inspector of taxes who, having received the approval of two Commissioners of the Board of Inland Revenue, having gone to a circuit judge and obtained the judge's approval for the issue of a warrant, uses his powers of search and entry. A similar procedure is involved in a suspected social security fraud involving a much smaller amount of money. I should be happier about the examples which have been put before the House if hon. Gentlemen had expressed the same worry about abuses of the social security system. I


know those abuses concern the hon. Gentleman, and they concern me. Equally tax abuses concern me and I hope they also concern hon. Gentlemen.
I take it that hon. Gentlemen are serious in their concern that a policeman should accompany an Inland Revenue officer—

Mr. Fairbairn: Yes.

Mr. Barnett: Anyone reading the debate might wonder about that. They might not feel that this is the serious matter that I consider it to be.
Following the undertakings I gave in Committee I have had consultations about the necessity for an official of the Board of Inland Revenue to be accompanied by a policeman when calling on a person suspected of fraud after search and entry powers have been given to him by a circuit judge. The view expressed to me is that in virtually every case where force is involved, and in many cases where search and entry powers are given, there will have been previous correspondence and it will be known what situation has to be dealt with. There will be no question of force being used. The official will simply call to see the individual and obtain the documents. Where there is any thought on the part of the Inland Revenue that force might be needed there is no problem about the official being accompanied by a police officer.
The view of the police is that they believe that it would be wrong to lay down, as a matter of rule, in every case, that a policeman must accompany an official calling on a person under his powers of search and entry. That is the police view of which I am bound to take note.

Mr. Clement Freud: Why do the police think that?

Mr. Barnett: The police do not feel that in every case as a matter of rule a policeman should accompany an official. What would happen if that principle were extended to every other part of the law?

Mr. Parkinson: This is only a handful of cases.

Mr. Barnett: There are many other precedents, in legislation enacted by the

Tories, which involved greater powers. I do not recall hearing from Conservatives, on the occasions when such legislation passed through the House, the kind of speech that we have heard tonight. Here we are dealing only with people liable to income tax. Under the value added tax legislation those who are liable include all who buy an item subject to the tax. When I hear the kind of speeches that Conservative Members have made this evening I must ask where they were on those other occasions. I know that some were not in this House. I almost said that I am delighted to see them with us now. I am not so sure that I am, because I could have done without hearing some of the things that I have heard, even though hon. Members have been pleasant towards me.
There is a serious point here. I can assure the House that the Inland Revenue officer will not seek to enter any premises by force except in the presence of a policeman. I can give that assurance. Because of the police view, which I believe is reasonable, it would not be right to write into the Bill some provision which would make it a matter of rule that on every occasion a police officer must accompany an Inland Revenue official.

Mr. F. P. Crowder: Does the right hon. Gentleman not realise that no police officer has any right whatever to enter into a private house without making a personal appointment? If the right hon. Gentleman thinks that, on behalf of the Government, the police can accompany Revenue officials and demand entry, let me tell him that he is dead wrong. We on the Conservative side will not stand for it. If the police—

Mr. Barnett: Mr. Barnett rose—

Mr. Crowder: I have the Floor.

Mr. Barnett: I do not want to give way.

Mr. Crowder: You will.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): The right hon. Gentleman did give way.

Mr. Barnett: But I have stopped giving way.

Mr. Crowder: I am on my feet. I am not having this. This will not do.

Mr. Barnett: The hon. and learned Member has just walked in.

Mr. Crowder: I have, and I was horrified to hear what the right hon. Gentleman was saying. This is nonsense. I want to make it clear from the Opposition side that I am not prepared for police to enter into a private house without giving notice or making a written appointment. It simply will not do. If the right hon. Gentleman thinks—

Mr. Deputy Speaker: Order. The hon. and learned Gentleman may have a point of view which he can express to the House subsequently.

Mr. Barnett: I am not too sure what that had to do with the schedule that we are discussing. If the hon. and learned Gentleman would care to read the schedule I think that on reflection he will feel that he should not have intervened as he walked into the Chamber.

Mr. Fairbairn: The Chief Secretary has given us an undertaking—what good it is I do not understand—that Revenue officials, if they are to break in and search, will always be accompanied by a police officer. Unfortunately the police officer would not be entitled to enter the premises. He would have no remit to do so. It is no good the Chief Secretary saying that this is the intention of the officials. It is beyond their powers. Let us have none of this nonsense.

Mr. Barnett: I am bound to say that the way in which this will normally work will not be as the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) envisages. Long before we reach that stage there will have been correspondence with the person concerned to try to elicit information and obtain a correct assessment. In most cases of tax fraud the matter will be settled without the sort of situation that is envisaged ever arising. In the case we are considering, where a search and entry power is given to an Inland Revenue official, he will have been in correspondence already with the person concerned, and there will be no question of any force entering into it. But where the Inland Revenue thinks there is a possibility or likelihood of force, he will,

under the terms of his warrant, ask for a police officer to accompany him. I am assured by the police that they will provide such support when asked to do so.

Mr. Viggers: The Chief Secretary, with respect, has got it completely wrong, and the sooner he reconciles his view with reality the better. If there is an intention to use force the policeman will accompany the inspector, but he will have to stop at the front gate. He cannot go into the premises, because it is not written into the Bill that he has the power to do so. In order to do so the policeman would have to get his own separate warrant. As the position stands at the moment, the policeman has no power to enter the premises with the inspector.

Mr. Barnett: I am not sure that the hon. Gentleman is right [HON. MEMBERS: "He is right."] I said that I am not sure. Hon. Members opposite are so arrogant in their assumptions. I said that I am not sure. I am waiting for a message to come from someone on high who has authority. I am always ready to accept hon. Members' views when they express them as assertions, but they have not quoted me chapter and verse. They have just asserted it.

Mr. Gow: Will the Chief Secretary not take the opportunity to confer with his hon. and learned Friend the Solicitor-General, who is here for this very purpose?

Mr. Barnett: The fact is that there is some doubt about the situation. That is why I say to hon. Members opposite that I am rather surprised that they should be so certain in their assertions. Clearly, it would all depend on the circumstance in any particular case. There is nothing new in this. There are many search and entry powers given under warrant, without anything like the safeguards we have here, where an official has the power to enter a home without being accompanied by a policeman. Indeed, that power was provided in the Finance Act 1972.
I believe that the assurance I have given should be more than adequate to deal with the problem. The police have indicated that they would be willing, when asked, to accompany an Inland Revenue official in the circumstances envisaged. The police consider that it would be wrong as a matter of rule to write it into the law. I am


bound to take that view into consideration, having consulted them and consulted my right hon. Friends, who are responsible for these matters and take that view into account. I hope that the House will also take it into account.

Mr. Fairbairn: The Solicitor-General apparently does not know whether the English police can enter or not in these circumstances. If the Scottish police were consulted, it would be found that the Scottish police cannot do so.

Mr. Barnett: I am delighted to hear about Scottish law. The position here, however, is that the police have indicated that, where there is a possibility of force arising, they will accompany the official. I should have thought that that was more than adequate and satisfactory to the House.

Sir G. Howe: We have spent an hour and a half in debating the amendment, which plainly raises an important point. The case has been canvassed by my hon. Friends from almost every imaginable point of view. My hon. Friend the Member for Eastbourne (Mr. Gow) has displayed a new and impressive talent for exercising massive compassion and concern for officials of the Board of Inland Revenue. I know that all my hon. Friends will be glad to see that he has an alternative bright and glowing career prospect ahead of him in the position now occupied by Mr. Cyril Plant, should he leave the House. But I hope that that necessity will never arise.
8.45 p.m.
Concern has also been expressed about the impact of these powers upon the citizen. When we come back to the realities as the Chief Secretary has approached them, there is a real issue here, and we must judge the right response by remembering that, if we take the right hon. Gentleman at his word, these will be only a handful of cases, they will be so important that they will require the personal approval of the Board of Inland Revenue and the interposition of a circuit judge, and that they will be a small number of cases where officials of the Board of Inland Revenue will be dealing with desperate men

armed with the power to use force if necessary.
The more serious the case for intervention, as the right hon. Gentleman suggests, the stronger becomes the case for seeing that they are accompanied by police officers. That much has been conceded by what the Chief Secretary said. The only offset—and it is a serious one—is that we would not want to add unnecessarily, if it were felt to be unnecessary, to the burden upon the police. But I think that we can set that to one side with the knowledge—it is a guarantee of the validity of the knowledge—that it is only in a minority of cases that these powers will be exercised.
The best way to demonstrate that would be to support the powers to require the presence of a police officer. That would be a guarantee that the powers would be used only in a minority of serious cases. If we needed an additional argument, it would be that to which the Chief Secretary had no answer. It is very doubtful whether a police officer would be entitled to enter the premises unless he were covered by the words which we now propose.

The Solicitor-General (Mr. Peter Archer): As I understood it, my right hon. Friend's undertaking was that there would be a police officer present where it was proposed to break in by force. Surely one breaks into premises from the outside. The police officer is there. There is no need for him to enter for that purpose. If it is thought that his presence is then necessary inside, if there is likely to be a breach of the peace, of course he has power to enter for that purpose.

Sir G. Howe: I have no doubt that, if a breach of the peace is expected, he can go in in that way. But what my hon. Friend seeks is an assurance that, on these few occasions when entry by force is likely to take place, a police officer should be there as a matter of course with the unquestioned right, whatever he may fear about a breach of the peace, to go into the premises.
I can see why my hon. Friends may wish to vote in support of this argument as soon as we have a chance to do so.

Question put, That the made: —

The House divided: Ayes 131, Noes 154.

Division No. 253.]
AYES
[8.50 p.m.


Atkins, Rt Hon H. (Spelthorne)
Holland, Philip
Price, David (Eastleigh)


Beith, A. J.
Hooson, Emlyn
Pym, Rt Hon Francis


Bell, Ronald
Howe, Rt Hon Sir Geoffrey
Raison, Timothy


Biggs-Davison, John
Howell, David (Guildford)
Rees, Peter (Dover &amp; Deal)


Blaker, Peter
Hurd, Douglas
Ronton, Rt. Hon Sir D. (Hunts)


Boscawen, Hon Robert
James, David
Rhys Williams, Sir Brandon


Bowden, A. (Brighton, Kemptown)
Johnson Smith, G. (E Grinstead)
Ridsdale, Julian


Boyson, Dr Rhodes (Brent)
Johnston Russell (Inverness)
Rifkind, Malcolm


Bryan, Sir Paul
Kellett-Bowman, Mrs Elaine
Roberts, Wyn (Conway)


Buck, Antony
Kimball, Marcus
Ross, Stephen (Isle of Wight)


Butler, Adam (Bosworth)
King, Tom (Bridgwater)
Rossl, Hugh (Hornsey)


Carlisle, Mark
Kirk, Sir Peter
St. John-Stevas, Norman


Clark, William (Croydon S)
Lamont, Norman
Scott, Nicholas


Clegg, Walter
Lane, David
Shersby, Michael


Cockcroft, John
Langford-Holt, Sir John
Sims, Roger


Cooke, Robert (Bristol W)
Lawrence, Ivan
Smith, Dudley (Warwick)


Cope, John
Lawson, Nigel
Spicer, Jim (W. Dorset)


Costain, A. P.
Le Marchant, Spencer
Spicer, Michael (S Worcester)


Crowder, F. P.
Lewis, Kenneth (Rutland)
Stanbrook, Ivor


Davies, Rt Hon J. (Knutsford)
Macfarlane, Neil
Stanley, John


Dodsworth, Geoffrey
MacGregor, John
Steel, David (Roxburgh)


Douglas-Hamilton, Lord James
Marten, Neil
Stewart, Ian (Hitchin)


Drayson, Burnaby
Mates, Michael
Tebbit, Norman


Emery, Peter
Mather, Carol
Thompson, George


Evans, Gwynfor (Carmarthen)
Maudling, Rt Hon Reginald
Townsend, Cyril D.


Fairbairn, Nicholas
Meyer, Sir Anthony
Trotter, Neville


Farr, John
Miller, Hal (Bromsgrove)
Vaughan, Dr Gerard


Finsberg, Geoffrey
Mitchell, David (Basingstoke)
Viggers, Peter


Fletcher-Cooke, Charles
Moate, Roger
Wainwright, Richard (Colne V)


Forman, Nigel
Montgomery, Fergus
Wakeham, John


Freud, Clement
Morgan, Geraint
Walker-Smith, Rt Hon Sir Derek


Fry, Peter
Morgan-Giles, Rear-Admiral
Warren, Kenneth


Galbraith, Hon T. G. D.
Morrison, Charles (Devizes)
Weatherill, Bernard


Gardiner, George (Reigate)
Morrison, Hon Peter (Chester)
Wells, John


Glyn, Dr Alan
Neave, Airey
Welsh, Andrew


Godber, Rt Hon Joseph
Nelson, Anthony
Whitelaw, Rt Hon William


Goodhew, Victor
Neubert, Michael
Wiggin, Jerry


Goodlad, Alastair
Newton, Tony
Wigley, Dafydd


Gow, Ian (Eastbourne)
Nott, John
Wilson, Gordon (Dundee E)


Grant, Anthony (Harrow C)
Onslow, Cranley
Winterton, Nicholas


Grieve, Percy
Page, Rt Hon R. Graham (Crosby)
Younger, Hon George


Grimond, Rt Hon J.
Paisley, Rev Ian



Hawkins, Paul
Parkinson, Cecil
TELLERS FOR THE AYES:


Hayhoe, Barney
Penhaligon, David
Mr. Fred Silvester and


Higgins, Terence L.
Percival, Ian
Mr. Anthony Berry.




NOES


Abse, Leo
Davidson, Arthur
Irvine, Rt Hon Sir A. (Edge Hill)


Archer, Peter
Davies, Bryan (Enfield N)
Irving, Rt Hon S. (Dartford)


Barnett, Guy (Greenwich)
Davies, Denzil (Llanelli)
Jackson, Colin (Brighouse)


Barnett, Rt Hon Joel (Heywood)
Davies, Ifor (Gower)
Janner, Greville


Bates, Alf
Davis, Clinton (Hackney C)
Jay, Rt Hon Douglas


Benn, Rt Hon Anthony Wedgwood
Deakins, Eric
Jeger, Mrs Lena


Bennett, Andrew (Stockport N)
de Freitas, Rt Hon Sir Geoffrey
Johnson, Walter (Derby S)


Bidwell, Sydney
Dell, Rt Hon Edmund
Kelley, Richard


Booth, Rt Hon Albert
Dormand, J. D.
Kerr, Russell


Boothroyd, Miss Betty
Douglas-Mann, Bruce
Kilroy-Silk, Robert


Bottomley, Rt Hon Arthur
Ellis, John (Brigg &amp; Scun)
Kinnock Neil


Bradley, Tom
Evans, Fred (Caerphilly)
Lamborn, Harry


Brown, Robert C. (Newcastle W)
Evans, Ioan (Aberdare)
Lamond, James


Brown, Ronald (Hackney S)
Ewing, Harry (Stirling)
Latham, Arthur (Paddington)


Butler, Mrs Joyce (Wood Green)
Foot, Rt Hon Michael
Lestor, Miss Joan (Eton Slough)


Callaghan, Rt Hon J. (Cardiff SE)
Ford, Ben
Lipton, Marcus


Callaghan, Jim (Middleton &amp; P)
Forrester, John
Loyden, Eddie


Carter, Ray
Fowler, Gerald (The Wrekin)
Luard, Evan


Carter-Jones, Lewis
Fraser, John (Lambeth, N'w'd)
Lyons, Edward (Bradford W)


Cartwright, John
Garrett, John (Norwich S)
Mabon, Dr J. Dickson


Castle, Rt Hon Barbara
Garrett, W. E. (Wallsend)
MacFarquhar, Roderick


Cocks, Michael (Bristol S)
George, Bruce
MacKenzie, Gregor


Coleman, Donald
Golding, John
Madden, Max


Colquhoun, Ms Maureen
Grant, George (Morpeth)
Mallalleu, J. P. W.


Conlan, Bernard
Grant, John (Islington C)
Marks, Kenneth


Cook, Robin F. (Edin C)
Hamilton, James (Bothwell)
Marquand, David


Corbett, Robin
Hamilton, W. W. (Central Fife)
Marshall, Jim (Leicester S)


Cox, Thomas (Tooting)
Hardy, Peter
Maynard, Miss Joan


Crawshaw, Richard
Harrison, Walter (Wakefield)
Meacher, Michael


Crosland, Rt Hon Anthony
Hayman, Mrs Helena
Mendelson, John


Crowther, Stan (Rotherham)
Hooley, Frank
Mikardo, Ian


Cryer, Bob
Huckfield, Les
Miller, Dr M. S. (E Kilbride)


Cunningham, G. (Islington S)
Hughes, Robert (Aberdeen N)
Morris, Rt Hon J. (Aberavon)




Moyle, Roland
Sedgemore, Brian
Tomlinson, John


Murray, Rt Hon Ronald King
Selby, Harry
Torney, Tom


Newens, Stanley
Shaw, Arnold (Ilford South)
Walker, Harold (Doncaster)


Ogden, Eric
Sheldon, Robert (Ashton-u-Lyne)
Ward, Michael


Orbach, Maurice
Shore, Rt Hon Peter
Watkins, David


Ovenden, John
Silkin, Rt Hon John (Deptford)
Weetch, Ken


Owen, Dr David
Silkin, Rt Hon S. C. (Dulwich)
Weitzman, David


Palmer, Arthur
Sillars, James
White, Frank R. (Bury)


Park, George
Silverman, Julius
Whitlock, William


Pavitt, Laurie
Skinner Dennis
Willey, Rt Hon Frederick


Peart, Rt Hon Fred
Small, William
Williams, Alan (Swansea W)


Pendry, Tom
Smith, John (N Lanarkshire)
Williams, Alan Lee (Hornch'ch)


Perry, Ernest
Snape, Peter
Williams, Rt Hon Shirley (Hertford)


Richardson, Miss Jo
Spearing, Nigel
Wise, Mrs Audrey


Roberts, Gwilym (Cannock)
Stewart, Rt Hon M. (Fulham)
Woodall, Alec


Robinson, Geoffrey
Stoddart, David



Rodgers, George (Chorley)
Strauss, Rt Hon G. R.
TELLERS FOR THE NOES:


Rooker, J. W.
Thomas, Mike (Newcastle E)
Mr. Joseph Harper and


Roper, John
Tierney, Sydney
Mr. Ted Graham.


Sandelson, Neville
Tinn, James

Question accordingly negatived.

Amendments made: No. 79, in page 127, line 4, at end insert—
'(1A) Section 4A of the Inland Revenue Regulation Act 1890 (Board's functions to be exercisable by an officer acting under their authority) does not apply to the giving of Board approval under this section.'.

No. 80, in page 127, line 6, leave out 'documents or other'.—[Mr. Joel Barnett.]

9.0 p.m.

Mr. Younger: I beg to move Amendment No. 81, in page 127, line 10, at end insert
'provided that the occupier shall be furnished with a list of all items taken by the officer of the Board'.

Mr. Deputy Speaker: With this we shall take Government Amendment No. 83, in page 127, leave out lines 11 to 19 and insert
but this does not authorise the seizure and removal of documents in the possession of a barrister, advocate or solicitor with respect to which a claim to professional privilege could be maintained.
'(4) Where entry to premises has been made with a warrant under this section, and the officer making the entry has seized any things under the authority of the warrant, he shall, if so requested by a person showing himself either—

(a) to be the occupier of the premises; or
(b) to have had the possession or custody of those things immediately before the seizure,

provide that person with a list of them.

(5) Where documents are seized which relate to any business, and it is shown that access to them is required for the continued conduct of the business, the officer who has seized them shall afford reasonable access to the documents to the person carrying on the business.

20D.—(1) For the purposes of section 20A and 20C above, "the appropriate judicial authority" is—

(a) in England and Wales, a Circuit judge;
(b) in Scotland, a sheriff; and
(c) in Northern Ireland, a county court judge.

(2) For the purposes of sections 20 and 20A, a person stands in relation to another as tax accountant at any time when he assists the other in the preparation of returns or accounts to be made or delivered by the other for any purpose of tax; and his clients are all those to whom he stands or has stood in that relationship.

(3) In sections 20 and 20C above "business" includes trade, profession and vocation; and in those sections and in section 20B "documents" include books, accounts and other documents or records whatsoever.'.

We shall also take the following amendments to Amendment No. 83:

Amendment (a), leave out
'in the possession of a barrister, advocate or solicitor'.

Amendment (d), in subsection (4) leave out from 'shall' to first 'the' in paragraph (a) and insert
'furnish a list of them to'.

Amendment (e), in subsection (4) leave out 'or (b) to have' and insert:
'and to the person who'.

Amendment (f), in paragraph (b) leave out:
provide that person with a list of them".

Amendment (b), in Section 20D(2) after assists', insert 'directly'.

Amendment (c), in Section 20D(2) leave out 'or has stood'.

Mr. Younger: It appears that Government Amendment No. 83 meets the substance of what I was proposing in Amendment No. 81. Therefore, I have moved it formally in the hope that the


Chief Secretary will be able to confirm that this is yet another concession to the valid arguments that have been put forward by the Opposition in Committee.

Mr. Joel Barnett: I am always happy to allow the hon. Member for Ayr (Mr. Younger) a little credit for having convinced the Government that he had a sensible argument. As I pointed out in Committee upstairs and on the Floor of the House, when we have a serious debate and a serious point is made, we like to consider it seriously.
Amendment No. 83 makes three substantive changes. First, the amendment prevents the seizure or removal of documents in the possession of a lawyer with respect to which a claim to professional privilege could be maintained. Secondly, the amendment provides that, where documents are seized in the execution of a search warrant, a list should be provided on request. I think that meets the hon. Gentleman's point. Thirdly, the amendment provides that, where documents are seized which relate to a business and it is shown that reasonable access to them is required for the continued conduct of the business, reasonable access shall be provided to the person carrying on the business.
Those points were made to me in Committee upstairs. I am glad to recommend the amendment to the House.

Mr. Peter Rees: I rise to speak to Amendments (a), (b) and (c).
I recognise the distance that the Chief Secretary has moved under delicate pressure from the Opposition in Committee. I am delighted that he has recognised the many respects in which Schedule 6 has proved, in the short time that it has been before the House, to be defective. However, there are one or two matters that still need to be cleared up.
Amendment (a) relates to professional privilege. I think that you, Mr. Deputy Speaker, will recall that in the early hours of this morning we had a long and relatively constructive debate on the question of professional privilege. The Chief Secretary, guided no doubt in these matters by the Solicitor-General, recognised that professional privilege was not just a matter of protecting professional people. That will come as a matter of reassurance to the hon. Member for

Luton, West (Mr. Sedgemore) who I am delighted to see joining in our debates again. I did not realise, from his earlier interventions, that he recognised any professional standards or constraints. We shall look for a quite different measure of interventions from him. [Hon. Members: "Withdraw."] No, I shall not.

Mr. Brian Sedgemore: I belong to the same stinking, rotten profession as the hon. and learned Gentleman.

Mr. Deputy Speaker: Order. The House does itself no credit with sedentary observations.

Mr. Rees: Such disloyalty to his own profession comes curiously from the hon. Gentleman. But, as we know, he is more concerned with his journalistic experience with Private Eye. I have no doubt that we shall hear a massive intervention by the hon. Gentleman on matters such as the inspector's report on Lonrho. No doubt in his intervention the hon. Gentleman will not draw on any professional experience.
I should like to resume the main theme of my intervention, which was on the question of professional privilege. Privilege, as my right hon. Friend the Member for Crosby (Mr. Page) and I had occasion to remark at about 2 o'clock this morning, is not designed to protect a barrister, advocate, solicitor or even an accountant. I do not say "even" in any pejorative sense. The purpose of privilege is to protect a person who seeks professional advice, so that the advice he receives is not open to the intrusive eyes of the Inland Revenue or, dare one say it, the police. I believe the Chief Secretary has taken that point on board, with the assistance of the Solicitor-General, in view of the undertaking he has given even at this late stage. It is a matter of curiosity that after 84 hours of debate in Committee and three days of debate in this House, it is still necessary for him to expose himself to further representations from professional bodies. One would have thought a more appropriate time would be in March or April before the Bill was published. It is not for me to make comments about this. We shall be able to deal with the whole method of transacting Government business when we debate the Third Reading.
On the basis of the right hon. Gentleman's undertaking I do not propose to take up the time of the House on Amendment (a). I shall deal with Amendments (b) and (c). Amendment (b) is designed to limit the definition of tax accountant. At the moment the definition of tax accountant is, in effect, "anyone who assists a person in the preparation of his returns for tax purposes." The amendment seeks to insert the word "directly".
The Chief Secretary, being, at any rate spasmodically, a fair-minded person—

Mr. Sedgemore: Go back to your ice-cream town.

Mr. Rees: —spasmodically, I repeat. I gather than the hon. Member for Luton, West is rather envious of the town that I represent. I am totally ignorant of the charms of Luton, and perhaps not by his intervention and not with his instruction—because I know that his tenure of the distinguished position as hon. Member for Luton, West is likely to be a rather short one—I certainly look forward to comparing the charms of Luton with those of Dover. At the moment I merely say to the hon. Gentleman that his was a rather ill-judged intervention from a sitting position—but recalling the level of his contributions to Private Eye it is all that we can expect from him. If I may be permitted, with the permission of the Chair and of the hon. Member for Luton, West, to resume my discourse, I point out that the purpose of Amendment (b) is to clarify a rather difficult point.
How far must a person be involved in assistance to a taxpayer, in respect of the preparation of his return for taxation purposes, to be regarded as a tax accountant? I think that the Chief Secretary will recognise that this is a modest and rather practical amendment, and I hope he will see his way to accepting it. If not, perhaps he will give his own definition, so that persons can see in what peril they may place themselves and their clients if they offer assistance, and can realise whether they will become tax accountants or not?
Amendment (c) seeks to insert the words "or has stood". At present, it appears that a person can be a tax accountant to someone even though he may long have given up any kind of professional

connection with that person. Therefore, if the tax accountant, so-called, is guilty of any kind of fault in the fiscal sense he may put all his clients, past or present, at risk.
I know that upstairs in Committee the Chief Secretary was disposed to put a certain weight on subsection (5) of the proposed new Section 20A, which, I agree, limits the right of the Revenue to give notice to a time within 12 months from the date of the conviction of the tax accountant, but that will be small consolation to those who, perhaps 15 or 20 years before, had stood in some kind of professional relationship to that person. I suggest to the House and to the Chief Secretary that it would be wise to limit the ambit of this provision to those who are currently the clients of the tax accountant who has defaulted in this way.
These are modest practical amendments. I hope that the Chief Secretary will take on board the arguments that I have adduced and accept them as making a practical contribution to the cause that he and I have in mind.

Mr. John Farr: Schedule 6 is a thoroughly unpleasant schedule. At this stage I have just one question to put. Why does the Minister, by his Amendment No. 83, accord a privileged position to barristers, advocates or solicitors—as a layman, I accept that they are privy to the secrets of others—and not confer the same privilege or exemption on people who may equally be privy to secrets although not necessarily secrets of a legal nature?
I regard the wording of the Government amendment as faulty in this respect. I think it wrong to make an exemption for members of the legal profession who are privy to secrets and not make the same exemption for other professional men, such as doctors, dentists or specialists. Doctors especially are privy to secrets every bit as confidential between their client or patient and themselves as are the secrets between client and member of the legal profession, whom the Government seek to exempt.
Will the Chief Secretary give an assurance that there will not be power to remove documents that could divulge confidential matters which should be privy only between a specialist or medical man and his patient?

Mr. Joel Barnett: The hon. Member for Harborough (Mr. Farr) asks why we do not extend the privilege to other professional men. That is rather different from the point constantly pressed upon me by his hon. and learned Friend the Member for Dover and Deal (Mr. Rees). We are talking here about professional privilege—I am not a professional man in that sense of the term—and I promised the hon. and learned Gentleman in Committee that I would look into the matter with a view to seeing whether, if the schedule was not altogether satisfactory, something more should be done.
The hon. Member for Harborough seeks to extend the exemption further. I think that he has not fully appreciated that in most of Schedule 6—certainly in the part to which he is now referring—we are dealing with the definition of what is called a tax accountant, who could be a lawyer who had given not only advice but more than advice.
That brings me at once to Amendment (b) to the Government amendment, in which the hon. and learned Member for Dover and Deal questions our definition of a tax accountant for this purpose. The Government amendment provides that
a person stands in relation to another as tax accountant at any time when he assists the other in the preparation of returns or accounts to be made or delivered by the other for any purpose of tax".
I shall come in a moment to the further definition in response to the hon. and learned Gentleman.
The hon. Member for Harborough will appreciate that in the normal way of things that would not apply in the circumstances that concern him, and he has no cause for worry.
I gather that the Inland Revenue has had discussions with the Law Society and has informed it that a legal adviser would not be regarded as a tax accountant unless he had been directly concerned in drawing up returns or accounts, or in preparing material for inclusion in returns or accounts. In these circumstances, it follows that the hon. and learned Gentleman's amendment would be unnecessary.
That is the main reason why I do not recommend the House to accept the amendment. I shall reconsider the definition, but I understand and am advised

that it is unnecessary because no problem will arise in the circumstances that I have explained.
9.15 p.m.
The effect of Amendment (c) would be to remove from the definition of "client" those clients for whom the accountant had acted in the past. That would go much too far, because we are dealing with a tax accountant who has been convicted of a tax offence and has therefore committed a criminal offence. One has to draw a line, and one should not be able to see a document when the person involved is someone who has been a client a day or a week before. In most cases of that kind it is fair and reasonable to leave it to a circuit judge to decide whether a document should be made available. I hope it will be seen that there is no need to press the amendment.

Amendment negatived.

Amendment made:

No. 83. in page 127, leave out lines 11 to 19 and insert
'but this does not authorise the seizure and removal of documents in the possession of a barrister, advocate or solicitor with respect to which a claim to professional privilege could be maintained.'

(4) Where entry to premises has been made with a warrant under this section, and the officer making the entry has seized any things under the authority of the warrant, he shall, if so requested by a person showing himself either—

(a) to be the occupier of the premises; or
(b) to have had the possession or custody of those things immediately before the seizure,
provide that person with a list of them.

(5) Where documents are seized which relate to any business, and it is shown that access to them is required for the continued conduct of the business, the officer who has seized them shall afford reasonable access to the documents to the person carrying on the business.

20D.—(1) For the purposes of section 20A and 20C above, "the appropriate judicial authority" is—

(a) in England and Wales, a Circuit judge:
(b) in Scotland, a sherrif; and
(c) in Northern Ireland, a county court judge

(2) For the purposes of sections 20 and 20A, a person stands in relation to another as tax accountant at any time when he assists the other in the preparation of returns or accounts to be made or delivered by the other for any purpose of tax; and his clients are


all those to whom he stands or has stood in that relationship.

(3) In sections 20 and 20C above "business" includes trade, profession and vocation; and in those sections and in section 20B "documents" includes books, accounts and other documents or records whatsoever.'.—[Mr. Joel Barnett]

Clause 56

GENERAL PROVISION CHARGING BENEFITS

Mr. Graham Page: I beg to move Amendment No. 236, in page 35, line 13, leave out
and other benefits and facilities of whatsoever nature".
The amendment is to the clause that introduces new provisions for charging benefits. They are more severe provisions than we had before. Subsection (2) defines what is meant by "benefits" in this way:
The benefits to which this section applies are living or other accommodation, entertainment, domestic or other services".
Then follow the words
and other benefits and facilities of whatsoever nature".
I am aware that those words, which the amendment seeks to leave out, have been used in statutes for about a quarter of a century, but that does not make them easier to understand. The opportunity could have been taken in the Bill to make those words clearer. Perhaps the Financial Secretary will tell the House what benefits will be included in the wide phrase
other benefits and facilities of whatsoever nature
which would not be included in those described more specifically in the previous line of the Bill.
I assume that only benefits ejusdem generis can be included in those general words. Although they are already used in statute, those general words have not been easy to interpret, and I had hoped that in this comprehensive clause about charging benefits we would have a better definition of exactly what is intended to be included in them in future.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): The right hon. Gentleman rightly points out that the words have been enshrined in statute since the 1948 legislation on benefits.

The amendment seeks to limit the definition of taxable benefits, other than those specified in Clauses 59 to 63, to the three categories he mentioned—living accommodation, entertainment and domestic or other services.
It seems that the right hon. Gentleman is seeking clarification more than anything else. If the amendment were passed a large part of the legislation that has existed since 1948 would be rendered unworkable. For example, it would remove from the benefits to be chargeable the use of yachts and aeroplanes belonging to the employer, the gift of assets or the sale at less than market value of such items as clothes, wines and groceries, and payment by the employer direct of liabilities incurred by the employee, free holidays, such as shooting or fishing holidays and such matters. The range of exemptions could be very large. It would make not only the legislation in prospect but even existing legislation unworkable.
It is not possible to categorise all the various kinds of benefit. That is why the words were used in the 1948 Act. They seem, at least in the limited way that that legislation provided, to have given the possibility of taxing the use of these benefits. It is only right that we should use those same useful words in the current legislation.

Mr. Graham Page: The hon. Gentleman says that they are useful words—useful to the Revenue in its being able to drag into the net of "benefits and facilities" new ones as they occur. That is why I had hoped that we could have a better definition, but at least the Financial Secretary has put on record what is intended to be included within the meaning of the words. Because it was only a probing amendment, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 57

EXCEPTIONS FROM GENERAL CHARGE

Mr. John MacGregor: I beg to move Amendment No. 222, in page 36, line 24, at end insert—
'(8) Section 56 does not apply to those benefits received by seafarers in the form of travel concessions to enable their wives to accompany them on voyages or to visit the husband's ship when in port'.


In Committee, the Opposition succeeded in making a substantial difference to the clauses on benefits in kind. We removed many of the nonsenses and many of the severe and unfair impositions. It is perhaps true that in some respects the Government gave way to the pressures which mattered to them most or which were exerted with the loudest or most numerous voices. I do not complain about that, because I agree with nearly all those pressures, but it is unfortunate that there are still a few deserving cases which have not been dealt with. The amendment deals with one. I am slightly disappointed, because in withdrawing a similar amendment in Committee I said that I thought that the case was overwhelming and that the Financial Secretary had given a stronger indication than normal that he hoped to do something about it.
The clause gives certain exceptions to the whole chapter dealing with fringe benefits. We seek to extend the exceptions to seafarers and their wives. Unless the amendment is agreed to, many groups will find themselves disadvantageously placed as compared with their previous position. They will find their tax materially increased.
The Bill will not adversely affect a number of people in the Merchant Navy and a number of private shipping companies. In some instances ships—perhaps container ships—go on pre-arranged routes at pre-arranged times. If the officers or others on those ships wish to have their wives accompany them, as so frequently happens now, there is no problem. That is because the wives are able to embark with them when they leave and to disembark when they return at a fixed point. But there are various groups of seafarers to whom that situation does not apply. Some of the tanker companies are the most obvious examples.
I understand that it is the position in some tanker companies—the Financial Secretary did not dispute this in Committee—that those who are employed as officers or others on their ships have to agree to a four and a half month commitment. That is because there is considerable uncertainty as to where the ships will go. They cannot be certain when and where they will disembark, or when and where the ship will eventually end.
Nowadays it is happily the normal practice to allow wives to travel with their husbands to enable them to have a normal marital relationship. It has been the practice of the companies in cases where the wives have not been able to leave originally with the ship, or in cases where a wife has to return early for some domestic reason, to fly them out or to send them out by ship and bring them back in the same way, whichever might be appropriate.
Under the Bill as it stands, it appears that husbands will find that the cost of flying the wives out or getting them back will add to their gross taxable income. In many cases that will make a material difference. I quote an example that is based on last year's experience that would be the reality this year if the same position applied. I refer to a third engineer whose gross annual salary was £4,600 but who would come into the net now as the £5,000 limit applies not merely to gross salary but to all expenses whether taxable or not.
Last year the third engineer had a disposable income, after meeting tax and normal outgoings such as mortgage, gas, electricity and coal, of about £1,600. His company incurred a cost of £1,100 in enabling his wife to join him or leave him on certain occasions during the year. He would pay nearly £400 extra tax for the doubtful privilege of having his wife engage in a normal marital relationship with him. That is a substantial sum. It is about 25 per cent. of his net disposable income. He would have to pay that for no real privilege.
When we consider the position of others, such as masters, who are further up the scale the situation can be even worse. I shall not bother the House with other examples although I have several of a similar character. As the full implications of the Bill are beginning to dawn on many people in the Merchant Navy and in shipping companies, they are becoming extremely alarmed at the consequences on modest take-home pay. I believe that something must be done.
I pressed this matter in Committee and I greatly regret that nothing has yet been done. Unless something is done, the effect on the companies which perform this rôle and the effect on Britain's economic performance in terms of its exports and


invisible payments will be quite drastic. There will be an adverse effect on recruitment. It is now quite a normal practice for companies to allow wives to be with their husbands. Many of those concerned will be inclined to serve under the flagships of many other countries that do not have the provisions that the Government propose. Therefore, EEC countries with shipping companies that do not operate such provisions will become an attractive magnet.
The companies are concerned about the real risk of losing many of the people who matter most to them in enabling them to engage in their normal business. In Committee the Financial Secretary expressed considerable sympathy, but unfortunately he does not yet seem to have met it. He explained in Committee that the Inland Revenue was engaged in discussions with the National Maritime Board to try to reach a solution.
9.30 p.m.
I greatly regret that these discussions have not led to a fruitful conclusion to enable us to say that the problem no longer arises. The major problem that arises relates to the length of time a husband is away. I cannot believe that this is an obstacle to finding a reasonable solution. Obviously there could be queries if a company were in the habit of sending wives to Hong Kong for short voyages as frequently as 10 or 20 times a year. That could be regarded as a fringe benefit. But that is certainly not the normal situation. I do not believe that a company would engage in such a practice and incur enormous expense in that way.
I have tried to speak in reasonable terms on this amendment, but it is a matter on which I feel strongly. This must be a case in which the Government did not intend to hit this class of people. The Government have given way in other respects and, since this is a reasonable amendment that affects ordinary working people, I hope that the Financial Secretary will be able to meet their case.

Sir John Hall: In the discussions upstairs in Committee it became apparent that we were discussing the possible tax plight suffered by seafarers as a result of the provisions of this Bill. The Bill is likely to affect more people

than just the seafarers covered by the amendment. Another class of persons, to whom attention was not drawn in Committee or indeed in this debate, is Members of Parliament.

Mr. Speaker: Order. I am sorry to interrupt the hon. Gentleman, but this amendment deals only with seafarers. We cannot go over what happened in Committee upstairs.

Sir J. Hall: I understand the point to which you draw my attention, Mr. Speaker, but in supporting the amendment moved so eloquently by my hon. Friend the Member for Norfolk, South (Mr. MacGregor) I thought it right to point out that the seafarers' case could be strengthened by drawing attention to similar categories of people in other spheres. I was merely taking Members of Parliament as an example, and I shall be brief.
It is known that Members' wives receive a certain number of vouchers in the course of a year—

Mr. Speaker: I am sorry once again to interrupt the hon. Gentleman, but he must confine himself to seafarers, which is the subject of the amendment I selected for debate.

Sir J. Hall: One could talk about seafaring Members of Parliament. However, I am not challenging your ruling, Mr. Speaker and I shall try to restrict my remarks to the problems of seafarers who will be penalised by the Bill's provisions if the Bill is not amended, or if the discussions now taking place between the National Maritime Board and the Inland Revenue do not reach a satisfactory conclusion.
I am sure that when the Government originally drafted the Bill, they did not intend to penalise seafarers. Although seafarers appear to be penalised in tax terms by the Inland Revenue, other persons are able to enjoy the same privileges of having wives join them on various occasions and they escape completely from any penalty. I do not know whether the Government intend anybody to escape these penalties, but if hon. Members are to be among those categories who will escape tax penalties, it will be a grave injustice to seafarers. Therefore, I hope that the Financial Secretary will say that seafarers are being treated in a


similar way to other categories—and, if not, why not? Why should one section of the community be absolved from a penalty which is clearly placed on another?
I hope that when he replies to this debate the Minister will not tell me that this is a subject for discussion between the National Maritime Board and the Inland Revenue. I hope that he will be very clear in saying whether other sections of the community in a similar position to seafarers will be caught by this penalty.

Mr. John Nott: On a point of order, Mr. Speaker. When the Bill was published all sorts of categories of people such as airline employees were included in this section. The Government have amended the Bill to take these categories out but seafarers and their wives have been left in. Surely, with great respect, we must be able to refer to comparable cases when we are debating the position of seafarers and their wives. If we cannot do so we cannot make a serious point.

Mr. Speaker: I do not wish to restrict the debate unduly but I understand that this issue was debated for 35 minutes in Standing Committee. The amendment was withdrawn because certain undertakings about the matter now being discussed were given. On the basis of that undertaking I selected this amendment. Of course hon. Members can make passing references to other categories of people, as the hon. Gentleman has succeeded in doing. However, the main point to be discussed must be the position of seafarers and not that of other people.

Sir J. Hall: On a point of order, Mr. Speaker. An undertaking also was given which would mean that the particular example which I quoted, that of wives of Members of Parliament, would be considered along with those of seafarers.

Mr. Speaker: The hon. Gentleman is unlucky. I have not chosen that amendment. I have chosen this one on the basis of the undertaking that was given to make observations on Report.

Mr. Ridley: I support my hon. Friend the Member for Norfolk, South (Mr. MacGregor) who moved this amendment so eloquently. I think that seafarers come in for rather hard tax treatment, because

although they spend most of their lives outside this country they are taxed at the penal rates operating within this country.
There is a link between this amendment and the last one because only the benefits and facilities which seafarers' wives receive, travelling to and fro to join their husbands, are caught by the provisions in this part of the Bill. It was very revealing to see whether seafarers' wives' travelling costs came into the list of malpractices which the Financial Secretary read out on the last amendment. Superficially, these malpractices are impeccably good Socialist targets for attack. One of these targets was yachts. Seafarers do not travel in yachts. They travel in tankers and bulk carriers which are in an entirely different category from yachts, although a man from Mars would find it difficult to distinguish between one sort of boat and another. However, the Labour Party does not have any such difficulty. It identifies yachts as wicked and evil things. Aeroplanes, particularly private aeroplanes, are also by definition, wicked.
The list also includes wines and groceries. That does not mean "plonk" and flour. It means champagne and pâté de foie gras, and I understand that those must be taxed if they are given to directors by their firms.
It is absolutely disgraceful. A fortnight in New Zealand, or a weekend in Paris, all found with wine on the firm, is the most disgraceful, wicked, capitalist, bloated Right-wing perk that can be given to anyone. But it happens that seafarers' wives travelling out to join their husbands for a trip in the Mediterranean or the Pacific would come within the category of free holidays. If the Government had accepted the last amendment these wives would have benefited from that device. But in the jargon of Socialism, in the technology and the white heat of the revolution through which we are living, a free holiday is wicked, especially if it is paid for by the employer and if the employee earns over £5,000 a year or is a director. In those circumstances it is declared illegal, wicked and mischievous and is prevented.
So the wretched man plodding round the Pacific in a
Dirty British coaster with a salt-caked smoke stack
is to be taxed on the cost of his wife's travel to see him. This is where the


prejudice of the Labour Party has got us. It is interesting that Labour Members are unable better to define their prejudice. If only they would take more trouble over that, perhaps having fewer meetings of the National Executive Committee or the Home Affairs Committee, stoking it up in Transport House, and if they would stop having these endless meetings of the Parliamentary Labour Party in Committee Room 10, and instead worked out with more precision what they wanted, these wretched seamen's wives could have been excluded from the Bill.
Doubtless there will be others who will be disadvantaged by this provision who do not come within the scope of Socialist demonology, but since they do not have such able spokesmen as my hon. Friend the Member for Norfolk, South they may not have been identified. But where we have identified these people let us let them off on this occasion. Let the Financial Secretary take his courage in both hands. I have explained to the members of the Tribune Group who are sitting there below the Gangway that these are not people in yachts; they are people in boats. Surely those hon. Members can entirely accept that there is a difference between a boat and a yacht.
It is wicked and bloated and capitalist to go in a yacht, but to go in a boat is fine, especially if one is cruising around the Mediterranean in a tanker. The Labour Members below the Gangway seem quite happy with that. They do not rise now to disagree with me, so I conclude that they are happy to accept the amendment. I commend it therefore to the Financial Secretary, who can dispose of it quickly by rising and saying that he accepts it, too.

Mr. Graham Page: My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) has convinced the Labour side of the Chamber that this is a good amendment. I am sure that Labour Members will support it. I shall certainly support it very warmly. We are not asking for any new concession; we ask only that the tax liability imposed on the Merchant Navy and the families of seafarers should be removed. If it remains in that form, it will deter the provision of this facility for the Merchant

Navy husband and wife. There are many Merchant Navy families in my constituency on Merseyside. Young wives who come into my surgery at weekends tell me of the nervous strain they feel because of the separation from their husbands. The same applies to Service men. The position of the young wives of Merchant Navy men has been recognised by the employers by the provision of this facility in the past.
9.45 p.m.
I have often found that the young wives of seafarers suffer from worries and anxieties that are not suffered by others. Sometimes their worries are straightforward. They say that they cannot stand the separation any longer. Sometimes they suffer from anxieties from which they would not suffer if they could share them with their husbands.
The Bill deters employers from providing a facility that allows the wife to spend a certain amount of time with her husband, and it does great damage. The amendment will not open the floodgates to other cases. It is a special case, which has been recognised by the Merchant Navy over the years. This is the first occasion on which these families have suffered the imposition of a tax of this sort. In connection with the Development Land Tax Bill I said recently that the Government had for the first time taxed charitable intentions. On this occasion we might say that for the first time the Government have taxed marital relations.
I understand that discussions are proceeding with the National Maritime Board. If the Report stage had not been rushed as it has been, no doubt those discussions would have come to fruition before we debated this matter. I hope that the results of those discussions will be produced shortly. The Financial Secretary may say that he will not wait for the results of the discussions. The amendment relieves Merchant Navy families of a new tax liability, and I hope that he will accept it. I give it the warmest support, for the sake of the many constituents of mine who are members of Merchant Navy families.

Mr. Jerry Wiggin: I do not wish to emulate my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) in his skilful


exposition of the political philosophy behind the apparent Government objection to the amendment. I have first-hand experience of the problems associated with the Merchant Marine and those highly-skilled, well-trained young men who go abroad for eight or nine months at a time with no possibility of coming home. They act as skippers or officers of vessels worth more than £20 million.
Before the days of air travel, ships returned to domestic ports. With the availability of fast transport, these exceptionally well-paid men are flown round the world. I am glad to say that they are British, although I am afraid that their crews are not, and frequently the ships are registered abroad for taxation and other reasons.
It is ludicrous not to encourage the technical and leadership capacities of out young men in the Merchant Marine, so that they will continue to lead the world as they have done for the past 100 years.
My hon. Friend the Member for Norfolk, South (Mr. MacGregor) referred to the doubtful privilege of having a wife come across the world to join a man in a far-station. I am not sure that I follow him in his argument. It is a right that this country has recognised substantially with members of the Armed Forces for some time. We spend large amounts of public money ensuring that our Service men see their wives and families.

Mr. MacGregor: It is simply that it seemed to me doubtful to regard this as a privilege.

Mr. Wiggin: I thought that I had misinterpreted my hon. Friend's remarks. My right hon. Friend the Member for Crosby (Mr. Page) described this as a facility. With his usual ability to choose the correct legal terminology, I believe that he has correctly defined it. It is not a privilege, a holiday or a benefit. It would be reasonable to exempt such a provision. After all, as my hon. Friend the Member for St. Ives (Mr. Nott) pointed out, the Government have rightly seen fit to remove from the Bill the provision taking away the free air travel facilities afforded not to the wives of airline employees but to the employees themselves. The same is true of the free travel facilities for railway employees. Such people can continue to enjoy these

concessions. But the man who may spend eight or nine months away from these shores, earning good foreign currency and paying taxes to the Government, is to have his wife's conjugal visit taxed. That seems crazy.
I would have thought that Labour Members would look upon our proposal as being fair and reasonable, and would agree that this privilege should not be taxed.

Mr. Farr: I support the amendment. I would like an assurance from the Government in relation to members of the Armed Services. There is a large group of Service men who have the privilege of having their wives and families flown to visit them overseas. It appears that there could be confusion in the minds of Service personnel whether, once the Bill is passed, this privilege could be assessed as part of their personal gross income.
I am sure that it would not be the wish of the Government to leave the situation like that. There are many other categories of persons who are not so well-deserving of the attention of the House at this hour as members of the Armed Forces. In many overseas postings it is right that a man's wife and family should have the chance to visit him. It would be quite wrong if there were any threat of the cost of that travel, which can be substantial, being included as part of his gross personal income.
I ask the Minister to assure us that there is no such intention. It may be that such an assurance would be good enough. It would be better if words to that effect were included in the Bill. My hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) mentioned the number of Service personnel in his constituency who had come to see him. I have a number of Service personnel in my constituency. Only the other day a constituent of mine, a mother with three children, was flown with her children, at the State's expense, to join her husband in BAOR.
I believe it is right that the Government should make it quite clear, preferably by an amendment at a later stage in another place, if not by a forthright addition, that there is no intention to include within the new tax net the cost of bringing a Service man's family to join


him, wherever he may be serving his country.

Mr. Robert Sheldon: The amendment moved by the hon. Member for Norfolk, South (Mr. MacGregor) seeks to exempt the benefit of a seafarer's wife accompanying her husband on a voyage. The intention of the other part of the amendment is that payment for the seafarer's wife to visit his ship in a foreign port should also be free from tax as a benefit.
As the hon. Gentleman will know, the withdrawal of subsection (4) of Clause 54, meant that tax liability on the wife accompanying her husband on the voyage is virtually free from being taxed as a benefit receivable. In fact, the only benefit that will be assessed as such is the cost of the food on the voyage. This is so under existing and earlier legislation. It means, therefore, that the position remains as it was.
Perhaps I could clear up one very considerable misunderstanding. It does not surpise me that those who were not present at the Finance Bill debates fell into it. They seem to be under a misunderstanding that there is some change in the position of the wife as a result of the legislation we are considering. There is no change at all. The position of the wife remains unchanged as a result of the Bill.
The discussions we have had and are having with the National Maritime Board are not for the purpose of bringing about changes in the position of these wives, but rather to remedy the position of these wives as it stood before the current legislation. That is what we are talking about, and we have to direct our attention to that.
The hon. Member for Norfolk, South was quite right in his remarks about the change in practice, whereby a number of shipping lines are encouraging wives to join their husbands. This is one of the causes of the present discussions. That more than anything else has brought this matter to the fore. The legislation that we are discussing does not alter the existing situation in any way. We are trying to find a solution here.

Mr. MacGregor: May I ask the hon. Gentleman first why he did not refer to

that point at all in the debate? Secondly, why is it that the companies have not been under that impression and have not been doing that in practice?

Mr. Sheldon: These discussions have been in train for some time with the National Maritime Board. There is the problem of the technical aspect as to under which circumstances a person can be held to be working wholly overseas. We are trying to find a satisfactory solution there.
I accept the importance of this. I expressed my views in the Standing Committee. We are considering what changes are called for in the Finance Act 1974, because that is where the difficulty arose—not in the present Bill—concerning United Kingdom employees who are working abroad.
The hon. Gentleman will know that I have received these representations, and I am considering what changes could be made in the tax treatment of seafarers, including their wives, and the benefits they receive. I am looking at it not only from the narrow aspect of the discussions with the National Maritime Board—which I mentioned in the Standing Committee, and which are still continuing—but also in regard to the vexed position of such people generally.
I assure the hon. Gentleman that these matters will be pressed as fast as possible in an attempt to meet the legitimate points made on Report.

10.0 p.m.

Sir John Hall: The Financial Secretary inadvertently has not answered the question which I put to him during the debate. I understood him to say that, under existing legislation, the husband whose wife joins him at the expense of his company, assuming that the husband is earning more than £5,000 a year, is liable for tax on the benefit enjoyed by the cost of that fare for his wife. Presumably that is also the case with other taxpayers who in the past have had incomes of £5,000 or more and whose benefits had to be returned under existing legislation as well as the proposals of this Bill. If that is so, how are Members of Parliament able to enjoy the benefits of vouchers for their wives over a period of time without apparently being surcharged for the benefit thus enjoyed in their tax—

Mr. Speaker: Order. I thought that the hon. Member for Wycombe (Sir J. Hall) was asking a question before the Financial Secretary finally sat down. The hon. Gentleman has addressed the House.

Sir J. Hall: Perhaps I might conclude by asking the Financial Secretary to answer the question which I put to him in the debate.

Mr. Nott: I am sure that the Financial Secretary is right in what he said and that when the wife of a merchant seaman receives the cost of an air fare from her husband's employer and flies abroad to join her husband's oil tanker at, say, Hong Kong, her husband is taxable on the benefit received.
I have had many cases over several years, before the Government's legislation was published, where a tax liability has arisen. I know that in debates on earlier Bills, before publication of this legislation, this matter has been one of some concern to Labour Members as well as to ourselves.
I think that it would meet the point here if the Financial Secretary could find some way of deeming the husband to be working overseas, thereby bringing the wife into the kind of legislation which takes diplomats out of benefits in kind because they are deemed to be working overseas.
However, I am not clear about the position of the wife of an airline employee or railwaymen who might conceivably have concessions by virtue of her husband's job and who travels at a concessionary rate on the airline or on the railways, and whether that would be

deemed to be a benefit in kind of the husband.
We are discussing the benefits of employees. The wife is not an employee. She has no direct relationship to her husband's employer. I am not clear why it would not be possible to say that this is not a benefit of the employee but is a gift which the husband's employer makes to the wife—as my right hon. Friend the Member for Crosby (Mr. Page) says, a "facility"—which is not really a benefit of the employee at all.
If my right hon. and hon. Friends are happy to do so, I think that we can leave the matter with the Financial Secretary, because clearly he wishes to help. Nevertheless, the point is a complicated one, and we are interested in whether this does not have repercussions on the employees of airlines, the railways and so on, because clearly we are seeking an outcome which is fair and which applies equally to all.

Mr. Robert Sheldon: The basis of the assessment of the benefit is the cost to the company.

Mr. Farr: Can the Financial Secretary say something about how the Armed Forces are affected?

Mr. Sheldon: There is no change in their position.

Mr. MacGregor: By leave of the House, Mr. Speaker, I will reply. This has been a useful debate and I hope that the Financial Secretary will find some way of dealing with our genuine point, preferably before the next Finance Bill. In view of his sympathetic reply, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 58

CASH EQUIVALENT OF BENEFITS CHARGED UNDER SECTION 56

Mr. Tony Newton: I beg to move Amendment No. 259, in page 37, line 15, leave out from 'year' to 'and' in line 17 and insert 'is' 15 per cent.'.

Mr. Speaker: With this we may take the following amendments:
No. 260, in page 37, line 15, leave out from 'year' to 'and' in line 17 and insert 'is 12½ per cent.'.
No. 261, in page 37, line 15, leave out '20' and insert '15'.
No. 262, in page 37, line 15, leave out '20' and insert '12½'.

Mr. Newton: I hope you will not rule me out of order, Mr. Speaker, if I thank you for the courtesy and kindness you have shown during a number of representations made to you about my amendments. I am grateful that you have allowed this group to be added to those already selected.
Although the motor industry and those of us who have argued about cars as benefits in kind are happy with many of the concessions the Government have made, there are a number of points still causing concern and my amendments cover one of them. Cars which are deemed to have an insubstantial business use will be taxed at 20 per cent. of the original market value for the first four years and at 10 per cent. for the remaining period. In Committee, we moved an amendment to reduce those rates to a straight line basis of taxation at 12½ per cent. over the whole period. I was not particularly happy with the Government's arguments at that time and I am even less happy now, following the concessions they have made in almost every other part of the Bill. The harshness of the provisions for cars which have an insubstantial business use stand out starkly against what has been done elsewhere and the amendments which the Government are to move later.
In Committee the Financial Secretary undertook to consider phasing the introduction of these provisions, with the possibility of applying them at half rate in

the first year or so. He has scrapped the phasing proposal in other parts of the Bill, but has halved the rates concerned anyway. Here we still have the original harsh levels.
Amendment No. 259 would substitute for the 20 per cent. and 10 per cent. figures, a straight line basis of 15 per cent. Amendment No. 260 would substitute a straight line basis of 12½ per cent. The other amendments propose a reduction of the 20 per cent. figure to 15 per cent. or 12½ per cent. Those are the choices. I am not dogmatic about which is best. I shall await the Financial Secretary's response before making a judgment.
The proposed basis of the charge is excessive. At the 20 per cent. rate, a person will have been taxed 80 per cent. of the value of the car within four years. Even with the drop to a 10 per cent. rate of charge after those four years, he will have been taxed on the entire value of the vehicle after only six years. That is a high basis of charge by any standard.
Whatever the level at which the charge is thought to be right, the ratio between the first four years and the subsequent years would seem to be wrong by comparison with the rest of the Bill. That presupposes a drop of one-half in the tax charge at the four-year break point.
In almost every case the differential, under the amended schedule, is only one-third between the charge for the first four years and that for the subsequent period. Whatever the level of the charge, it is difficult to see why there should be a differential of one-half in these provisions compared with a differential of only one-third in almost all the other provisions relating to the charge on cars. On that basis the 20 per cent. figure is too high. A charge of 15 and 10 per cent. would be fairer and more in line with the rest of the Bill than the 20 per cent. and 10 per cent. charge.
I now refer to the possible practical effect of the proposals on the car market. There is a considerable risk that the net result of these proposals will be to encourage people to keep their cars significantly longer. For example, a car whose original market cost now is £5,000 will create for the beneficiary a tax charge of


£1,000 in the early years. At the end of the four years, it will drop to £500. The person involved will have reduced his tax burden to that extent. The firm may wish to replace that car. The car that cost £5,000 originally may have to be replaced by one costing £7,000, which would mean a tax charge of £1,400. By having his car replaced at that point, the person involved would incur an additional charge to tax of £900 a year. That will give him an incentive to ask his employer not to replace the car but to allow him to carry on with the older model.
But I am not concerned with the effects on the person. But that process may do considerable damage to the demand for cars such as Rover and Jaguar at the prestige end of the British motor car industry. That cannot be to the benefit of the British motor car industry, which depends significantly for its overseas markets and profitability on those kinds of vehicles.
Under the heading of the practical effect on the car market, there must be a considerable chance that some people will find it better and more sensible to buy their own cars and claim against the company for whatever business mileage they do rather than have a company car. It is not easy to work out the figures. However, there is a point—under these proposals we shall be close to it—at which the employee would be significantly better off to borrow to buy a car and build up an asset of his own rather than pay this level of tax charge on a car provided by the company. The consequence of that might easily be once again to divert demand from British cars, which are on the whole purchased by companies for fleet purposes, to imported cars, which are notoriously more popular with those who buy cars for themselves.
10.15 p.m.
The effect of both those factors may be marginal. One cannot readily judge. However, it is clear that under neither head can there be any benefit to the British motor car industry and under both heads there could be some disadvantage to that industry.
The fourth point concerns the practical effect of these proposals on individuals. At the moment, cars in this

category are taxed under Inland Revenue rules at only 12½ per cent. compared with the proposed 20 per cent. Some firms, depending on the agreements that they have with the Inland Revenue, are taxed at only 10 per cent. That means that for many individuals there will be a doubling of the tax charge at high marginal rates of taxation on quite expensive cars. Those people, though they are not amongst the poorest sections of our community, are amongst those managers who, according to what the Chancellor has repeatedly said, have been having a hard time under the tax and pay policies. The disincentive effects on those people, whom the Chancellor is now anxious to help, will do great damage to British industry. These proposals go in the opposite direction from any desire to help middle and upper management in British industry. They will hit many of those people very hard, as many hon. Members who have had letters from Unilever and other companies know. The Government cannot lightly dismiss that point in present circumstances.
There is also the issue of fairness between different individuals. I should like to quote from a letter which appeared in the Financial Times this morning which gives an example of the difference in the tax charges which would now arise, depending on which side of the quite narrow line the taxation provisions fell whether they were taxed as cars available for private use or as having insubstantial business use. The letter reads:
Case 1. Business car costing £6,000—user doing, say, 5,000 business miles and unlimited private milage, would have additional taxable earnings
—under the proposals that we shall be discussing later—
of between £175 and £350 depending on engine size.
Case 2. Company car also costing £6,000 but with insufficient mileage to classify a business car would, assuming, say, 4,000 business miles and 14,000 total mileage have additional taxable earnings calculated as follows.
The figures are then given. I shall not go through them in detail. However, as far as I can see, the writer of the letter rightly arrives at a total taxable benefit of £857. Therefore, with a very narrow dividing line, individuals in very much the same position could end up on this figuring with a taxable benefit of between £175 at one


end of the scale and £857 at the other end. If that situation could conceivably arise, I do not think that it could possibly be defended as being fair.
From talks that I have had with people in industry who may be affected by these provisions, one point emerges. It is not a statistical point nor in some ways a point of political argument, but it is one which the Financial Secretary cannot dismiss. It is that, in practice, those individuals and companies which have been honest and open in their dealings with the Inland Revenue will be penalised compared with those who, frankly, have bent the rules.
That point has been made to me by some who work for large international companies in this country which, contrary to popular impression, are amongst the most scrupulous in not appearing to dodge or bend the tax rules in any way. They have made arrangements with the Inland Revenue which have openly acknowledged that the business use is insubstantial in circumstances where others might easily have sought to bend the rules and gain some benefit for their employees. People in these companies are now saying "Look where you have got us by being honest in your dealings and playing it absolutely straight. We shall be clobbered, whereas those who have been bending the rules will get away with lower tax burdens."
It is not an argument on which I would want to put too much stress except that we are already building up a situation in which far too many people have come to the conclusion that it simply does not pay to be honest in their dealings over tax. We are creating a situation in which we are encouraging a growing tax immorality in the sense that these proposals appear to penalise people who have played it absolutely straight for the way in which they have played it absolutely straight. These proposals will only do additional damage, and that is an important political reason why the Financial Secretary should reconsider them.

Mr. Hal Miller: I must apologise to my hon. Friend the Member for Braintree (Mr. Newton), and to the House, for missing his first sentence when he rose to move his amendment, with which I have every sympathy.
The Government are to be belatedly congratulated on recognising that they

have made an absolute nonsense of this whole proposal to tax company cars. The reasons why it is a nonsense are completely self-evident. As stated the other day, in response to a question from me, sales of company cars amount to between 50 per cent. to 60 per cent. of the new registrations in this country, and, of those sales of these new registrations, about 85 per cent. to 90 per cent. in the company sector are British cars.
It will be readily seen that the weight of imports, now amounting to 35 per cent. of new registrations, falls in the private sector. It is no wonder that the Government have had to reconsider their original proposals, and we must be thankful for that. But tomorrow afternoon we are to have unveiled the report of the tripartite group working on the motor industry—the Government, management and unions—under the auspices of NEDC. The House will recall the statement we had last week on the Government's industrial strategy. We do not need this great unveiling to remind us that, long ago, the little Neddy of the motor industry made it plain that one of the greatest disincentives to the motor industry in this country was the constant changing of Government policy of which we have a prize example once more before us this evening.
But that is not all, because the Government are continuing to change the rules for the motor industry at the present time. I do not wish to stray beyond the bounds of order, but it is perhaps within the recollection of the House that the Secretary of State for Industry gave me an assurance that there was to be no move away from the road fund licence towards a tax on petrol. Yet, two days later, the Secretary of State for Energy announced that it was still under active consideration in his Department. What are we to make of a Government who handle their affairs in this way? More importantly, what is the British motor car industry to make of it? How is that industry to make cars when the ground rules are being constantly changed? That is the question to which the Financial Secretary has to address himself this evening.
The remaining points have been more than adequately covered by my hon. Friend the Member for Braintree. I am


merely trying to underline, and emphasise, the seriousness of the steps which are being taken this evening on the industrial front. As a taxpayer, I always had to pay between 12½ per cent. and 20 per cent. for the private use of the company car that I used to enjoy. I cannot see why the Government have not paid more attention to enforcement and, if necessary, to an increase of such well understood rules rather than introducing a whole lot of new provisions which will only create uncertainty and damage to the car industry while, at the same time, the Government are pouring in thousands of millions of pounds of our money in order to sustain that industry. It makes no sense whatever.
I hope that the Financial Secretary will address himself seriously to the case we are making, not in any partisan spirit but as part of the Government's own industrial strategy. For heaven's sake let us have some continuity in fiscal policy towards the motor industry.

Mr. Peter Hordern: I had not intended to speak in the debate, but I noted that my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller) said that company cars accounted for 60 per cent. of new registrations from the entire British motor industry. I cannot, therefore, understand how these provisions could have been put in the Bill in the first place. It is, of course, all of a piece with the other proposals which appeared in the Bill affecting tied houses and airline employees. First, we found that the proposals regarding tied houses caught a senior union official. Then it was found that under the provision directed at airline employees railwaymen also would be caught, so that was dropped.
Until now, however, the provision at present under debate has remained in the Bill. If my hon. Friend is right—I am sure that he is—in telling us that 60 per cent. of new registrations from the British motor industry are accounted for by company cars and Civil Service cars, that is a very high proportion. As I understand it, 35 per cent. of new registrations are accounted for by imports.
It is pretty obvious that the pool cars and other Civil Service cars and company cars are, by and large, of British manu-

facture. Therefore, the free market is only 40 per cent., and 35 per cent. of it is taken by foreign imports, which means that only 5 per cent. are genuinely bought by people acting on their own account. That is the proportion which they are prepared to buy from the British motor industry.
I wonder what Lord Ryder thinks about it all. We are told that he gets to his office every morning at half-past seven, but then he looks at the newspapers and sees that the Government propose to make these charges and tax those who have company cars.

Mr. Hal Miller: I should not like my hon. Friend to be misled by the rather jumbled way in which I presented the figures. In fact, it is 60 per cent. of total new registrations, and of that 60 per cent. about 15 per cent. are imports, the remaining 85 per cent. of the 60 per cent. being British made. It is not, therefore, quite fair to say that the private motorist buys only 5 per cent. of British cars.
I hope that I have made the position clear: 15 per cent. of the 60 per cent. represents imports in the company car sector. A large part of import sales goes to the private sector, and the great damage which is being done here—if I may be a hit technical—is that market demand will be pushed down to the smaller car, where our performance and manufacturing capacity is weakest.

Mr. Hordern: I am grateful to my hon. Friend. I thought for a moment that he was about to tell me what Lord Ryder had for breakfast, but I am obliged to him for his explanation because I now understand that the situation is not quite as weak as I originally thought. Nevertheless, it is still pretty bad, so what Lord Ryder thinks when he goes to the British Leyland factories and tells the workers that they must carry on with their production becanuse otherwise funds will not be forthcoming for investment, and he sees at the same time this proposal from the Government, I simply cannot imagine. I assume that during his remarks to the workers he does not enjoy telling them that the Government propose to make these charges on those who receive assistance from their companies in acquiring their cars and that they are to be heavily taxed.
The Government have put in fresh proposals, and rightly so, but any additional burden on the individual who will now be assessed at a higher rate of tax must be recognised as a burden on the British motor industry itself. I cannot imagine how the Government ever thought it right to place this additional burden on the British motor industry, which is already under enormous competition and pressure and is currently looking for assistance from the Government in other directions. The Government must be absolutely crazy to produce this kind of provision.
10.30 p.m.
In order to qualify for any reduction in the assessment, employees have to show that they have driven 25,000 miles in a year. For many salesmen that is a high mileage. People will therefore be travelling in ever-widening circles to carry out their work. That is no incentive to efficiency, but the provision will have that kind of adverse effect.
I am surprised that, instead of scrapping the whole proposal, the Government have decided slightly to amend it. It is bound to be an extra burden on the motor industry which can ill afford that at this time. The Government would have been better to scrap the proposal.

Mr. David Mitchell: I wish to question the Minister on another aspect of the proposal. I refer to the small business man, such as the farmer, market gardener or shopkeeper, who uses his vehicle as an essential part of his daily business life. He will not travel 25,000 miles in a year. He will probably have an estate-type car so that he can collect and deliver goods but he will not use it much in his private life because business will be his way of life. There are many people such as that particularly in rural areas, who will say to me "Is it right that a Minister who uses his car for work should pay no tax whereas, as a business man doing fewer than 25,000 miles a year, I shall be clobbered?" How do I reply to that?

Mr. Robert Sheldon: Some of the arguments used in the debate have related to amendments which are to be debated later and it might be better if I dealt with them at that time. The 25,000-mile argument is in that category. That amendment concerns those cars in substantial

business use. I take the point made by the hon. Member for Horsham and Crawley (Mr. Hordern) about the motor industry.
I do not believe that the amendment is the subject of much controversy and feeling about the future in the motor industry because we are dealing with a small proportion of cars. One figure that I have seen shows that about 2,000 out of the 700,000 company cars in use are involved. That is only one estimate, but it helps to indicate the number that now engages our attention.

Mr. Newton: We are concerned with the upper end of the car market and 2,000 out of such quality, prestige cars is a greater proportion than the Minister implies.

Mr. Sheldon: My information seems to cast doubt on that. We are concerned with cars that are in insubstantial business use. A common example would be those which are legitimately made available to a secretary or a director's wife. A large number of those cars—I do not know the proportion—would be fairly small vehicles.

Mr. Nott: Where does the figure of 2,000 come from? It is important that we know how large a part of the total it is.

Mr. Sheldon: This is just the Inland Revenue's own assessment of what it might be [HON. MEMBERS: "Oh."] I hedged it round with qualifications from the beginning.
But these are not the normal circumstances in which company cars are made available for the large proportion of those concerned. This reflects the way in which the motor industry approaches the problem. Under the present system the benefit is taxed on the basis of 12½ per cent. of the cost when new. When we examined the proposed changes concerning the amounts of benefits and the methods by which they should be taxed we had to see how circumstances had changed over a period of years.
That this particular issue is not the motor industry's main concern is evidenced by the fact that the industry has not made the point with any particular force, nor was it put to us in this way by the Society of Motor Manu-


facturers and Traders. It is the other amendments and changes that should concern us when we are thinking about the motor industry's future.
The annual value basis of 12½ per cent. was set in 1960, when interest charges were very different. They are a relevant item in the value of the benefit received. The leasing charge by commercial companies for cars in the categories about which we are talking is about 30 per cent. That does not have to be the rate we choose, but there is some connection between the big rise in interest rates since 1960 and leasing charges.

Mr. Victor Goodhew: The important point is the extent to which someone who has one of these cars provided for him uses it for private purposes. Leasing charges do not come into it. The more a company director or whatever uses a car on business, the less likely he is to want to drive around in it at weekends. He will be delighted to sit at home rather than drive it around all the time.

Mr. Sheldon: That might be a valid point if we were not talking about cars with substantial business use. If they had substantial business use they would be taxed differently. We are talking about cars with insubstantial business use purchased by employers for the convenience of the people concerned. We do not want to deprive them of a normal and reasonable way of providing cars if they wish. The matter of heavy business use will arise on subsequent amendments.
We are considering the rate that should apply to those who have the facility of a car for private use made available to them. If it were 12½ per cent. in 1960, when interest rates were so much lower, we think it reasonable that the rate should be 20 per cent., dropping to 10 per cent. after four years. I hope that that will be accepted by the House.

Mr. Nott: We are very dissatisfied with this whole matter. I shall not take the opportunity of going over the whole debate on company cars and the manner in which the Government have handled this part of the Bill. It is getting late and we must deal specifically with the amendment.
I must point out to the Financial Secretary that nowhere is the term "substan-

tial" or "insubstantial" defined. This matter was debated at some length in Committee. Surely it is unsatisfactory that no one outside the Revenue knows exactly where the line will be drawn. The definition has not been made known to the House or the country, nor to those who use the cars. We do not know where the line will be drawn.
My hon. Friend the Member for Braintree (Mr. Newton) referred to an example that appears in today's issue of the Financial Times. If we are not wholly dependent upon the whim of the Revenue, we are dependent upon it to the extent of where the line is drawn between substantial and insubstantial.

Mr. Robert Sheldon: They will be for substantial business use.

Mr. Nott: The Financial Secretary says that both cases are for substantial business use. He told us that Mr. Dewsbury, who wrote to the Financial Times, will not have an extra £857 added to his taxable income, only £175 to £350. But we are talking about £500 or so of that man's taxable income. The hon. Gentleman throws that across the Floor of the House as if it is a mere gesture. He seems to suggest that Mr. Dewsbury is all right because he will not have to pay the tax on an extra £500. The hon. Gentleman chucks it across the Floor of the House as if it is nothing. I know that he was trying to be helpful and that I am always attacking him when he is trying to be helpful, but that is not the way in which our tax legislation should be handled. We cannot have £500 of someone's taxable income left to Revenue discretion. It is those who are on the frontier between substantial and insubstantial use who do not know where they are. They have no idea what their tax will be. It is for them that we speak.
I turn to the impact on the motor industry. It is all very well for the hon. Gentleman to say that the Revenue estimates that only 2,000 cars are involved. That may or may not be right. It is only the Revenue that can assess the number because it is only the Revenue that can define the difference between substantial and insubstantial use. But if that is the Revenue's estimate, let us take it. The fact is that the burden will still fall substantially on the higher priced cars. Many of the problems that resulted


from the Government's original proposals were related to the higher priced cars. We were concerned with the impact upon the investment programmes of Rolls Royce and Jaguar, for example. Their investment would have been severely damaged by the original proposals. That is one of the reasons for them being changed.
The proposal that 20 per cent. of the value of the car is taken for the first four years and 10 per cent. thereafter means that there will be a disincentive at the end of four years not to buy another car. The motor industry rightly says that not having one rate throughout the period will affect the sale of new cars particularly in the expensive bracket.
10.45 p.m.
My hon. Friend the Member for Braintree is right to have tabled an amendment which would involve a straight-line depreciation of 12½ per cent. throughout the period. Surely that is a better solution of the problem. There would then have been no disincentive to buying a new car at the end of the four years because there would be a 12½ per cent. scale throughout the period of its life.
The motor industry has made this point. in a memorandum. I do not understand why it is not possible for the Government to consult the motor industry on these matters before they bring in proposals. The motor industry prefers a single-figure throughout the life of the car. The Government prefer figures of 20 and 10 per cent. But the industry's figures over the period could have been to average out to the same amounts as the Government are proposing on their figures.
Let me return to the main point involving the impact of these arrangements on the individual. We cannot have legislation going through this House where people who have a motor car, admittedly a more expensive motor car in the £4,000£5,000 bracket—

Mr. Robert Sheldon: The hon. Gentleman refers to a more expensive car. What evidence has he that more expensive cars

are involved in this particular form of obtaining cars?

Mr. Nott: Because 20 per cent. of £5,000 is more than 20 per cent. of £3,000. Therefore, if somebody has a more expensive car, his taxable income will be higher by virtue of the fact that the value of that car is greater.

Mr. Robert Sheldon: What makes the hon. Gentleman think that a car bought in this way would be one of the more expensive cars?

Mr. Nott: Because the more expensive car will place somebody in a higher tax bracket than would be the case with a cheaper car. Therefore, the impact of these proposals will fall more heavily on more expensive cars than on less expensive cars.
The point I am seeking to make is that the person who has a car that falls on the borderline—and we do not know where that borderline is—in terms of substantial or insubstantial business use will not have the slightest idea, until the Revenue so decides, whether his taxable income will be £300 a year or £857 a year extra. That is not the open kind of way in which tax should be dealt with. We think that the Government are wrong and I hope that my colleagues will support the amendment.

Mr. Newton: I am thoroughly dissatisfied with the answer. I shall seek leave to withdraw Amendment No. 259 and I shall seek a Division on Amendment No. 260. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Newton: I beg to move Amendment No. 260, in page 37, line 15, leave out from "year" to "and" in line 17 and insert "is 12½ per cent.".

Question put, That the amendment be made:—

The House divided: Ayes 107, Noes 162.

Division No. 254.]
AYES
[10.50 p.m.


Atkins, Rt Hon H. (Spelthorne)
Butler, Adam (Bosworth)
Crowder, F. P.


Berry, Hon Anthony
Carlisle, Mark
Dodsworth, Geoffrey


Biggs-Davison, John
Clark, William (Croydon S)
Drayson, Burnaby


Blaker, Peter
Clegg, Walter
Emery, Peter


Boscawen. Hon Robert
Cockcroft, John
Fairbairn, Nicholas


Bowden, A. (Brighton, Kemptown)
Cooke, Robert (Bristol W)
Farr, John


Boyson, Dr Rhodes (Brent)
Cope, John
Finsberg, Geoffrey


Buck, Antony
Crouch, David
Forman, Nigel




Fry, Peter
Mates, Michael
St. John-Stevas, Norman


Gardiner, George (Reigate)
Meyer, Sir Anthony
Scott, Nicholas


Glyn, Dr Alan
Miller, Hal (Bromsgrove)
Shersby, Michael


Godber, Rt Hon Joseph
Mitchell, David (Basingstoke)
Sims, Roger


Goodhew, Victor
Moate, Roger
Smith, Dudley (Warwick)


Goodlad, Alastair
Montgomery, Fergus
Speed, Keith


Gow, Ian (Eastbourne)
Morgan, Geraint
Spicer, Jim (W. Dorset)


Grant, Anthony (Harrow C)
Morgan-Giles, Rear-Admiral
Spicer, Michael (S Worcester)


Hawkins, Paul
Morrison, Charles (Devizes)
Stanbrook, Ivor


Hayhoe, Barney
Neave, Airey
Stanley, John


Higgins, Terence L.
Nelson, Anthony
Stewart, Ian (Hitchin)


Holland, Philip
Neubert, Michael
Tebbit, Norman


Hordern, Peter
Newton, Tony
Townsend, Cyril D.


Howe, Rt Hon Sir Geoffrey
Nott, John
Trotter, Neville


Howell, David (Guildford)
Onslow, Cranley
Vaughan, Dr Gerard


Hurd, Douglas
Page, Rt Hon R. Graham (Crosby)
Viggers, Peter


James, David
Paisley, Rev Ian
Wakeham, John


Johnson Smith, G. (E Grinstead)
Parkinson, Cecil
Walker, Rt Hon P. (Worcester)


Kellett-Bowman, Mrs Elaine
Percival, Ian
Warren, Kenneth


Kirk, Sir Peter
Price, David (Eastleigh)
Weatherill, Bernard


Lamont, Norman
Prior, Rt Hon James
Wells, John


Lane, David
Pym, Rt Hon Francis
Whitelaw, Rt Hon William


Langford-Holt, Sir John
Raison, Timothy
Wiggin, Jerry


Lawrence Ivan
Renton, Rt. Hon Sir D. (Hunts)
Winterton, Nicholas


Lawson, Nigel
Rhys Williams, Sir Brandon
Younger, Hon George


Le Marchant, Spencer
Ridsdale, Julian



Macfarlane, Neil
Rifkind, Malcolm
TELLERS FOR THE AYES:


MacGregor, John
Roberts, Wyn (Conway)
Mr. Carol Mather and


Madel, David
Rossi, Hugh (Hornsey)
Mr. Fred Silvester.




NOES


Abse, Leo
Garrett, John (Norwich S)
Orbach, Maurice


Archer, Peter
Garrett, W. E. (Wallsend)
Orme, Rt Hon Stanley


Atkinson, Norman
George, Bruce
Ovenden, John


Barnett, Guy (Greenwich)
Golding, John
Owen, Dr David


Barnett Rt Hon Joel (Heywood)
Grant, George (Morpeth)
Palmer, Arthur


Bates, Alf
Grant, John (Islington C)
Park, George


Beith, A. J.
Grimond, Rt Hon J.
Pavitt, Laurie


Benn, Rt Hon Anthony Wedgwood
Hamilton, James (Bothwell)
Pendry, Tom


Bennett, Andrew (Stockport N)
Hamilton, W. W. (Central Fife)
Penhaligon, David


Bidwell, Sydney
Hardy, Peter
Perry, Ernest


Booth, Rt Hon Albert
Harper, Joseph
Prentice, Rt Hon Reg


Boothroyd, Miss Betty
Harrison, Walter (Wakefield)
Richardson, Miss Jo


Brown, Robert C. (Newcastle W)
Hooley, Frank
Roberts, Gwilym (Cannock)


Brown, Ronald (Hackney S)
Huckfield, Les
Robinson, Geoffrey


Butler, Mrs Joyce (Wood Green)
Hughes, Robert (Aberdeen N)
Rodgers, George (Chorley)


Callaghan, Jim (Middleton &amp; P)
Irvine, Rt Hon Sir A. (Edge Hill)
Rooker, J. W.


Carter, Ray
Irving, Rt Hon S. (Dartford)
Roper, John


Carter-Jones, Lewis
Jackson, Colin (Brighouse)
Ross, Stephen (Isle of Wight)


Cartwright, John
Janner, Greville
Sandelson, Neville


Castle, Rt Hon Barbara
Jay, Rt Hon Douglas
Sedgemore, Brian


Clemitson, Ivor
Jeger, Mrs Lena
Selby, Harry


Cocks, Michael (Bristol S)
Johnson, Walter (Derby S)
Shaw, Arnold (Ilford South)


Coleman, Donald
Johnston, Russell (Inverness)
Sheldon, Robert (Ashton-u-Lyne)


Colquhoun, Ms Maureen
Kelley, Richard
Shore, Rt Hon Peter


Conian, Bernard
Kerr, Russell
Silkin, Rt Hon John (Deptford)


Cook, Robin F. (Edin C)
Kinnock Neil
Silkin, Rt Hon S. C. (Dulwich)


Corbett, Robin
Lamborn, Harry
Silverman, Julius


Cox, Thomas (Tooting)
Lamond, James
Skinner Dennis


Crawshaw, Richard
Latham, Arthur (Paddington)
Smith, John (N Lanarkshire)


Cronin, John
Lestor, Miss Joan (Eton &amp; Slough)
Snape, Peter


Crosland, Rt Hon Anthony
Lipton, Marcus
Spearing, Nigel


Crowther, Stan (Rotherham)
Loyden, Eddie
Stallard, A. W.


Cryer, Bob
Luard, Evan
Steel, David (Roxburgh)


Cunningham, G. (Islington S)
Lyons, Edward (Bradford W)
Stewart, Rt Hon M. (Fulham)


Davidson, Arthur
Mabon, Dr J. Dickson
Strauss, Rt Hon G. R.


Davies, Bryan (Enfield N)
MacFarquhar, Roderick
Thomas, Mike (Newcastle E)


Davies, Denzil (Llanelli)
MacKenzie, Gregor
Thompson, George


Davies, Ifor (Gower)
Madden, Max
Tierney, Sydney


Davis, Clinton (Hackney C)
Mallalleu, J. P. W.
Tinn, James


Deakins, Eric
Marks, Kenneth
Tomlinson, John


Dell, Rt Hon Edmund
Marquand, David
Torney, Tom


Dormand, J. D.
Marshall, Jim (Leicester S)
Wainwright, Richard (Colne V)


Douglas-Mann, Bruce
Maynard, Miss Joan
Walker, Harold (Doncaster)


Ellis, John (Brigg &amp; Scun)
Meacher, Michael
Ward, Michael


Evans, Fred (Caerphilly)
Mendelson, John
Watkins, David


Evans, Gwynfor (Carmarthen)
Mikardo, Ian
Weetch, Ken


Evans, Ioan (Aberdare)
Miller, Dr M. S. (E Kilbride)
Weitzman, David


Foot, Rt Hon Michael
Morris, Rt Hon J. (Aberavon)
Welsh, Andrew


Ford, Ben
Moyle, Roland
White, Frank R. (Bury)


Forrester, John
Mulley, Rt Hon Frederick
Whitehead, Phillip


Fowler, Gerald (The Wrekin)
Newens, Stanley
Whitlock, William


Fraser, John (Lambeth, N'w'd)
Ogden, Eric
Wigley, Dafydd







Williams, Alan (Swansea W)
Wilson, Gordon (Dundee E)
TELLERS FOR THE NOES:


Williams, Alan Lee (Hornch'ch)
Wise, Mrs Audrey
Mr. David Stoddart and


Williams, Rt Hon Shirley (Hertford)
Woodall, Alec
Mr. Ted Graham.


Question accordingly negatived.

Clause 59

CARS AVAILABLE FOR PRIVATE USE

11.0 p.m.

Mr. Neville Trotter: I beg to move Amendment No. 271, in page 38, line 18, at end insert—
'Provided that no charge shall arise if the private use of the car made by him or others being members of his family or household in that year was merely incidental to his other use of it in the year.'

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With this it may be convenient to take Amendment No. 272, in line 18, at end insert—
'(1A) For the purposes of this section "incidental" private use shall mean private use not exceeding twenty per cent. of the total use'.

Mr. Trotter: In Clause 58 we were not talking about cars for the "man in the street", but rather about the small number of cars hardly used at all for business. In this clause, however, we are talking of those cars with substantial business use, in other words about hundreds of thousands of ordinary taxpayers who are to be arbitrarily assessed on figures which bear no resemblance to the facts of their own motoring—

Mr. Deputy Speaker: Order. It would be convenient if hon. Members were able to hear what was said.

Mr. Trotter: There is of course some change in the Government proposals. The taxed benefit on an 1800 cc or 1900 cc car will be reduced by the derisory sum of £10 from £360 to £350, which figure bears no regard to the facts of each case. Hardly any taxpayers will benefit and a very large number stand to lose as a result. We do not know the amount of additional revenue. It has been suggested, however, in the Press that something like an additional £100 million may be brought in.
My suggestion is that we should ignore incidental private use of a car which is basically used for business purposes, and Amendment No. 272 suggests that 20 per cent. should be taken as "incidental" for this purpose.
If the Minister feels that it is unfair that incidental private use should be ignored. I refer him to Clause 60 dealing with pool cars, under which the incidental use of a pool car will not give rise to an assessed benefit on the fortunate person who has the use of it. I need hardly remind the Minister that he is the fortunate recipient of a pool car.
It seems strange to me and will seem strange to hundreds of thousands of ordinary motorists who are to suffer penal charges as a result of Clause 59 that there should be different treatment for Ministers' cars from that for the ordinary man in the street.
Recently I asked the Chancellor in a Written Question whether he could explain why, when assessing benefits, private mileage was to be ignored for the chauffeur-driven cars used by Ministers when it was not to be ignored for the ordinary citizens. The answer was that Ur; Minister would let me have a reply as soon as possible. It seems that the civil servants in the Treasury have not been able to think of a satisfactory explanation. I have not been able to think of one, and I suggest that the ordinary motorist will not be able to think of one either. I look forward to hearing whether the Minister can provide a satisfactory explanation tonight.

Mr. Robert Sheldon: The purpose of this amendment is to relieve from a charge to tax the benefit received from a company car where the private use of that car is not more than 20 per cent. of total use. The hon. Member for Tyne-mouth (Mr. Trotter) seeks to provide that such cars will be exempt from the provisions of this legislation. I should point out that if the amendment were carried we would be back with the old situation of obtaining the agreement of the inspector of taxes to an apportionment of the amount of use of the car for business and the amount of use for private purposes. The inspectors of taxes are in no position to challenge the proportions put to them.
For the large number of people who have to provide not only the purchase price of their cars but also the running costs, the disadvantages would remain. Those with company cars would retain


an unchallengeable advantage. What we seek to do is to provide a reasonable and rational approach whereby those with company cars, and requiring them for good reasons, pay the correct amount of tax, which they know and understand in advance.
The hon. Gentleman is asking about pool cars, and I can tell him something about them. A pool car arrangement—and there are many such arrangements throughout industry and commerce—consists of cars which are made available to more than one employee, and which are not kept overnight at an employee's home. Anyone who wants to set up such an arrangement is perfectly entitled to do so.
I will deal with the case for exempting pool cars from these provisions. There are two tests to be satisfied before we are entitled to carry this part of the legislation into effect. First, we must ask whether there is a case for a special arrangement to be made for those pool car services at present in operation. Is there a distinction between those pool car services at present operating and company cars? Is there a distinction between the benefit receivable from a pool car and the benefit receivable from a company car? If we answer "Yes" to that, the next question is, how should this difference be treated for tax purposes.
The first aspect of a pool car arrangement is that the person does not have the car available for his own purposes. It is not normally available for weekends or holidays. He does not have it available at his garage other than for business use.

Mr. Trotter: Not many ordinary taxpayers can afford £10,000 a year for the benefit of a chauffeur-driven car, as enjoyed by the Ministers.

Mr. Sheldon: It is for industry to decide how to make arrangements for the transport of employees. It is not for me to dictate to industry or to commerce how best to organise the travelling arrangements of employees. It is up to industry or commerce to make the choice in the way that is thought most suitable and to meet the requirements imposed by taxation.

Mr. David Mitchell: Will the Minister not accept that the position he has described is the identical position which exists in the case of the small business man using his car for business purposes all the time? How will the Minister go home from the debate tonight? Will he be taken home in a pool car?

Mr. Goodhew: Can the Minister assure us that the pool car with the chauffeur is a much greater benefit than a car which the—

Mr. Russell Kerr: Let us get back to the argument.

Mr. Goodhew: The hon. Gentleman consistently wastes the time of the House in attacking me whenever I speak. Does not the Minister accept that the pool car with a chauffeur to clean it and look after it and pick up the occupant is a much greater benefit than the normal person receives from the car that he has to drive and to clean for himself? If the Minister tells me that he cannot be driven home in his car tonight, I will drive him home in my car.

Mr. Sheldon: The basis of the pool car is that it is made available to the employee for business use. I am seeking to establish what a pool car does. The hon. Gentleman will then be quite entitled to see whether the Government car service meets the requirements of the pool car arrangements in the current legislation. Under the pool car arrangements as they exist in the Bill today—and as they presumably will continue to exist—company cars are made available for employees to enable them to go about their business activities. These suffer a number of restrictions from which company cars do not suffer.
Concerning the advantages of a company car, I quote from a book by Peter N. C. Cooke entitled "The Company Car". He has had much experience in operating car services in a number of different firms. He writes:
Company executives who receive a car would not expect to have restrictions placed on its use.
This accords with all our experience. We all know that company cars provided in this way answer to this description in much more than 90 per cent. of cases. The writer continues:
Some companies restrict the drivers allowed to use the car to people nominated by the


executive concerned, normally restricting the list to the employee's spouse and, perhaps, his children or immediate family.
11.15 p.m.
The restrictions that companies place upon the cars they provide for their employees are very few indeed. We know from this book that company cars are normally available for foreign travel. This accords with our understanding of the use made of company cars throughout the country.
This does not apply in the general arrangements for pool cars. They are kept in a central area for the benefit of employees who may use them in going about company business. These cars are available to more than one employee and not kept at employees' homes.

Mr. Goodhew: Is the Financial Secretary going to be driven home in a pool car this evening or does he want me to give him a lift?

Mr. Sheldon: I should prefer to walk home rather than accept the hon. Gentleman's invitation.
As long as no one seeks to deny the difference between the operation of pooled and company cars, we shall listen to hon. Member's views with interest, but we must consider the advantage of company cars and their proper taxation. We do not wish to return to the unsatisfactory features of the impossible task of inspectors of taxes who were expected to deal with these matters without knowledge of the business of the company concerned or the proportion of private mileage to the total. We now have the opportunity to bring order into this matter.

Mr. F. P. Crowder: Before the war, Cabinet Ministers were paid £5,000 a year and did not have pool cars They were paid £5,000 a year so that they could provide their own cars and, if necessary, drivers. In order to put the matter on a firm financial basis, should we not be paying Ministers a proper salary to enable them to provide their own cars? Nothing horrifies me more than seeing Ministers of the Crown going off with their drivers— who are, no doubt, waiting for them at this moment.
I am sure that the Financial Secretary would prefer a reasonable salary and to provide his own car on a proper taxation basis. Otherwise, if Ministers are to be

put in the privileged position of using pool cars, they will, in effect, be having free use of a car which would cost other people about £1,000 a year to run. Surely that is the last thing a Socialist Government would wish to see. I am sure that Socialist Ministers would agree that if they are to have cars they should provide them for themselves.

Mr. Peter Walker: At night the drivers of ministerial cars used to be entitled to take their cars home and to garage them there. If that is still the position, may I ask—this is in the interests of Government drivers rather than those of Ministers—whether any form of taxation will be levied on Government drivers who constantly take cars home and have the benefit of using them to go to their place of work? If those drivers are exempted, what is the position of the chauffeur employed by a private company who lives either in the same house as—or in a cottage in the grounds of the residence of—the chairman of the company? That chauffeur constantly garages the car at his home in the same way as ministerial drivers are allowed to garage ministerial cars.

Mr. Peter Rees: This is a matter of some delicacy. Perhaps you, Mr. Deputy Speaker, would give a little guidance to the House. I wonder whether the Minister should make a declaration of interest. Perhaps he has no interest to declare. [Interruption.] I shall be happy to give way to Government supporters who may wish to intervene, but I shall not give way to those who attempt to intervene from a sitting position.
This debate has delicate overtones. It might be to the advantage of the House and the debate if the Minister indicated whether the car that brought him here this afternoon was made available to and used by, more than one Minister of the Crown. The Financial Secretary is a man of sensitivity and honour. It might help the House to make up its mind on this important amendment if we knew how far Ministers of the Crown —and especially the Financial Secretary —were involved in this matter.
Perhaps you, Mr. Deputy Speaker, might give your guidance to the Minister and the House on this point.

Mr. Deputy Speaker: I have no indication to give to the Minister as to what


he should or should not declare. I should like to declare that my impression was that we were talking about private use.

Mr. Peter Rees: How may I know what private use is accorded to the Minister? Perhaps the Minister would like to disclose to the House how far and how often his car is used to take him back to his house. As I understand the definition, that is private use. I do not complain. However, we should like to know, in the general context of this debate, how much private use is accorded to Ministers. As I say, I do not complain as, on the whole, Ministers are hard-used and underpaid. It would help us to judge the merits or demerits of this case if we knew how much private use was accorded to Ministers and whether their cars, by the strict and narrow definition of this clause, may be regarded as pool cars. I think that the House and the public would be interested in that point.

Mr. Fairbairn: It is important when considering the question of the taxation of company cars to study the ministerial position with some care. The Treasury conclude that the person involved should not get away with this benefit, especially if his car is used privately. I am informed that the Leader of the House frequently dines or lunches at Lockets. If that is so, does he go there in a Ministerial car?

Mr. David Mitchell: He is an honourable man.

Mr. Fairbairn: The Prime Minister referred to those upon whom we depend for investment to enable the country to go ahead again. Are the Government now saying that those people are getting away with something? Let us have a little honesty. These are only pool cars.

Mr. Peter Walker: I hope that my hon. and learned Friend appreciates that yesterday, when dining at Lockets, the Leader of the House gave a lift to Tory MPs who perhaps should declare their interest.

Mr. Fairbairn: That is public use. I am talking about private use. No doubt the Leader of the House refused the offer of the hackney fare which no doubt Tory

MPs would have offered him. That at least was a pool car, so we could pretend that it was not private use but a kind of Government service that we should all enjoy.
Let us consider the position of the ex-Prime Minister. The right hon. Member for Hyton (Sir H. Wilson) has a personal car with a chauffeur, fuel, and everything at the taxpayers' expense—£12,000 a year.

Mr. Ridley: Mr. Ridley rose—

Mr. Neil Kinnock: On a point of order, Mr. Deputy Speaker. Is there not some danger of this debate descending into inordinate stupidity, which I realise is not strictly out of order, if hon. Members are allowed to make these ridiculous comparisons and exchanges on the basis of what former Prime Ministers of both major parties are entitled to? Is it not demeaning the House to engage in this kind of exchange?

Mr. Deputy Speaker: The thought had crossed my mind that we were straying a little from the strict wording of the amendment.

Mr. Fairbairn: I am concerned with principle. When we are dealing with private use—[Interruption.] Hon. Gentlemen opposite are always appealing to great high-flown principles. Let them listen for a moment to this concept and principle. They are always appealing to civil liberties and fairness.

Mr. James Lamond: This is pathetic.

Mr. Fairbairn: If there is to be a charge on the citizen for private use, we should consider whether others are getting a benefit. Here we have not only Ministers but Members of this House who have no more right than any other citizens. I should like to think that we regarded ourselves as having less right and more duty than other citizens. But a Member of this House has a car, a driver and fuel for either private or public use. 'That is a matter on which the Treasury should put its jealous eyes. If necessary, it should break into one or all of his holiday homes to look for papers which might disclose fraudulent evasion of tax.
One example is good enough. A principle should apply to all or to none. We have people who are obtaining a benefit of £12,000 a year on the public Exchequer for their own private purposes as ordinary citizens who happen to be Members of this House, and that benefit is not subject to tax. If that is not an abuse of private use, the Treasury and Ministers should withdraw any suggestion that other citizens, who are doing their best by the community, should be made subject to a tax to which certain priviledged people who have committed the sin of becoming very rich, which I understand is wrong in the eyes of hon. Gentlemen opposite—they find that offensive—are not subject. It is bad enough that anybody should be an exception, but that somebody who has committed the offensive sin of becoming rich, which I understand is a sin, should have this benefit on a personal basis seems very bad. To use such a benefit for personal use is an affront to the pretence of hon. Gentlemen opposite who claim to care for those in poverty.

11.30 p.m.

Mr. Robert Sheldon: I should like to reply briefly to two important points. I take note of what the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) said.
The first point arises from what was said by the right hon. Member for Worcester (Mr. Walker). One of the requirements of pool car status is that it is not normally kept overnight at or in the vicinity of any residential premises where the employees reside. Clearly, occasional garaging of the car where the employee resides would be acceptable. What we have to bear in mind is that we are not here concerned with tax on ministerial cars.
It would be relatively easy if we wanted to introduce a tax just on ministerial cars

to deal with this problem but we have to consider what is the practice in industry and we must not create legislation which will make the task of those people operating services of this kind more difficult than it is at present. Once we accept that pool cars have a certain position which singles them out, this makes them eligible for treatment different from that which would be adopted in the ordinary way. We have to consider whether the proposed tax arrangements are worked out in fairness to operations of this kind, and I believe that that is the case.

Mr. Trotter: That was an interesting debate but the main argument put forward by the Minister was really that the Revenue is unable to cope with the present procedure and therefore it proposes to be unfair to practically all taxpayers to get over its little difficulties. I found that a quaint answer.
With regard to pool cars, I do not think that it was a stupid comparison, and I do not believe that the ordinary motorist will regard it as a stupid comparison, if any ordinary motorist happens to he passing here when the 70 cars drive out with their 70 chauffeurs and 70 Ministers —although there do not seem to be 70 Ministers present tonight.
The Minister cannot deny that if a business car were used solely for journeys to and from home by a business man there would be a tax assessment on that car. But there is no such assessment on Ministers. I cannot help thinking that the situation would be different if there were no pool cars for Ministers. If pool cars were applied only to business men we would see them being taxed in the same way as everybody else's car.

Question put, That the amendment be made:—

The House divided: Ayes 101, Noes 152.

Division No. 255.]
AYES
[11.35 p.m.


Atkins, Rt Hon H. (Spelthorne)
Crowder, F. P.
Hawkins, Paul


Biggs-Davison, John
Dodsworth, Geoffrey
Hayhoe, Barney


Blaker, Peter
Drayson, Burnaby
Higgins, Terence L.


Boscawen, Hon Robert
Fairbairn, Nicholas
Holland, Philip


Bowden, A. (Brighton, Kemptown)
Farr, John
Hordern, Peter


Boyson, Dr Rhodes (Brent)
Finsberg, Geoffrey
Howe, Rt Hon Sir Geoffrey


Buck, Antony
Forman, Nigel
Howell, David (Guildford)


Butler, Adam (Bosworth)
Gardiner, George (Reigate
Hurd, Douglas


Carlisle, Mark
Glyn, Dr Alan
James David


Clark, William (Croydon S)
Godber, Rt Hon Joseph
Johnson Smith, G. (E Grinstead)


Cockcroft, John
Goodhew, Victor
Kimball, Marcus


Cooke, Robert (Bristol W)
Goodlad, Alastair
Kirk, Sir Peter


Cope, John
Gow, Ian (Eastbourne)
Lamont, Norman


Crouch, David
Grant, Anthony (Harrow C)
Lane, David




Langford-Holt, Sir John
Nott, John
Spicer, Michael (S Worcester)


Lawrence, Ivan
Onslow, Cranley
Stanbrook, Ivor


Lawson, Nigel
Page, Rt Hon R. Graham (Crosby)
Stanley, John


Le Marchant, Spencer
Paisley, Rev Ian
Stewart, Ian (Hitchin)


Macfarlane, Neil
Parkinson, Cecil
Tebbit, Norman


MacGregor, John
Percival, Ian
Townsend, Cyril D.


Madel, David
Price, David (Eastleigh)
Trotter, Neville


Mates, Michael
Pym, Rt Hon Francis
Vaughan, Dr Gerard


Mather, Carol
Raison, Timothy
Viggers, Peter


Meyer, Sir Anthony
Rees, Peter (Dover &amp; Deal)
Wakeham, John


Miller, Hal (Bromsgrove)
Renton, Rt Hon Sir D. (Hunts)
Walker, Rt Hon P. (Worcester)


Mitchell, David (Basingstoke)
Rhys Williams, Sir Brandon
Warren, Kenneth


Moate, Roger
Ridsdale, Julian
Weatherill, Bernard


Montgomery, Fergus
Rossi, Hugh (Hornsey)
Wells, John


Morgan, Geraint
St. John-Stevas, Norman
Whitelaw, Rt Hon William


Morgan-Giles, Rear-Admiral
Scott, Nicholas
Wiggin, Jerry


Morrison, Charles (Devizes)
Shersby, Michael
Winterton, Nicholas


Neave, Airey
Sims, Roger



Nelson, Anthony
Smith, Dudley (Warwick)
TELLERS FOR THE AYES:


Neubert, Michael
Speed, Keith
Mr. Anthony Berry and


Newton, Tony
Spicer, Jim (W Dorset)
Mr. Fred Silvester.




NOES


Abse, Leo
Golding, John
Pavitt, Laurie


Archer, Peter
Grant, George (Morpeth)
Pendry, Tom


Atkinson, Norman
Grant, John (Islington C)
Penhaligon, David


Barnett, Guy (Greenwich)
Hamilton, W. W. (Central File)
Perry, Ernest


Barnett, Rt Hon Joel (Heywood)
Hardy, Peter
Prentice, Rt Hon Reg


Bates, Alf
Harper, Joseph
Richardson, Miss Jo


Beith, A. J.
Harrison, Walter (Wakefield)
Roberts, Gwilym (Cannock)


Benn, Rt Hon Anthony Wedgwood
Hooley, Frank
Robinson, Geoffrey


Bennett, Andrew (Stockport N)
Huckfield, Les
Rodgers, George (Chorley)


Bidwell, Sydney
Hughes, Robert (Aberdeen N)
Rooker, J. W.


Booth, Rt Hon Albert
Irvine, Rt Hon Sir A. (Edge Hill)
Roper, John


Boothroyd, Miss Betty
Irving, Rt Hon S. (Dartford)
Ross, Stephen (Isle of Wight)


Brown, Robert C. (Newcastle W)
Jackson, Colin (Brighouse)
Sandelson, Neville


Brown, Ronald (Hackney S)
Janner, Greville
Sedgemore, Brian


Butler, Mrs Joyce (Wood Green)
Jay, Rt Hon Douglas
Selby, Harry


Callaghan, Jim (Middleton &amp; P)
Jeger, Mrs Lena
Shaw, Arnold (Ilford South)


Carter, Ray
Johnson, Walter (Derby S)
Sheldon, Robert (Ashton-u-Lyne)


Carter-Jones, Lewis
Johnston, Russell (Inverness)
Shore, Rt Hon Peter


Cartwright, John
Kelley, Richard
Silkin, Rt Hon John (Deptford)


Castle, Rt Hon Barbara
Kerr, Russell
Silkin, Rt Hon S. C. (Dulwich)


Clemitson, Ivor
Kinnock, Nell
Silverman, Julius


Cocks, Michael (Bristol S)
Lamborn, Harry
Skinner, Dennis


Coleman, Donald
Lamond, James
Smith, John (N Lanarkshire)


Conlan, Bernard
Latham, Arthur (Paddington)
Snape, Peter


Cook, Robin F. (Edin C)
Lestor, Miss Joan (Eton &amp; Slough)
Spearing, Nigel


Corbett, Robin
Lipton, Marcus
Stallard, A. W.


Crawshaw, Richard
Loyden, Eddie
Steel, David (Roxburgh)


Cronin, John
Luard, Evan
Stewart, Rt Hon M. (Fulham)


Crosland, Rt Hon Anthony
Lyons, Edward (Bradford W)
Stoddart, David


Crowther, Stan (Rotherham)
MacFarquhar, Roderick
Strauss, Rt Hon G. R.


Cryer, Bob
MacKenzie, Gregor
Thomas, Mike (Newcastle E)


Cunningham, G. (Islington S)
Madden, Max
Tierney, Sydney


Davidson, Arthur
Mallalleu, J. P. W.
Tinn, James


Davies, Bryan (Enfield N)
Marks, Kenneth
Tomlinson, John


Davies, Denzil (Llanelli)
Marquand, David
Torney, Tom


Davies, Ifor (Gower)
Marshall, Jim (Leicester S)
Walker, Harold (Doncaster)


Davis, Clinton (Hackney C)
Maynard, Miss Joan
Ward, Michael


Deakins, Eric
Meacher, Michael
Watkins, David


Dell, Rt Hon Edmund
Mendelson, John
Weetch, Ken


Dormand, J. D.
Mikardo, Ian
Weltzman, David


Douglas-Mann, Bruce
Miller, Dr M. S. (E Kilbride)
White, Frank R. (Bury)


Ellis, John (Brigg &amp; Scun)
Morris, Rt Hon J. (Aberavon)
Whitehead, Phillip


Evans, Fred (Caerphilly)
Moyle, Roland
Whitlock, William


Evans, Ioan (Aberdare)
Mulley, Rt Hon Frederick
Williams, Alan (Swansea W)


Foot, Rt Hon Michael
Newens, Stanley
Williams, Alan Lee (Hornch'ch)


Ford, Ben
Ogden, Eric
Williams, Rt Hon Shirley (Hertford)


Forrester, John
Orbach, Maurice
Wise, Mrs Audrey


Fowler, Gerald (The Wrekin)
Orme, Rt Hon Stanley
Woodall, Alec


Fraser, John (Lambeth, N'w'd)
Ovenden, John



Garrett, John (Norwich S)
Owen, Dr David
TELLERS FOR THE NOES:


Garrett, W. E. (Wallsend)
Palmer, Arthur
Mr.Thomas Cox and


George, Bruce
Park, George
Mr. Ted Graham.

Question accordingly negatived.

Mr. Robert Sheldon: I beg to move Amendment No. 86, in page 38, line 23, leave out '£5,000' and insert '£6,000'.
This is the first of a number of amendments dealing with changes in the scales

which follow our undertaking to consult the motor industry about benefits provisions. It is as a result of a number of meetings involving all sections of the trade, various Government Departments, the Inland Revenue and the Treasury—


I have taken part in some myself—that the changes are proposed.
The amendment defines the difference between the less expensive cars with a cylinder capacity covered by Table A and those covered by Table B. We may want to discuss these matters in a wider context later.

Amendment agreed to.

11.45 p.m.

Mr. Robert Sheldon: I beg to move Amendment No. 87, in page 38, line 31, leave out from year' to end of line 33.
The amendment concerns the half scale for 1977–78, which is not now required because of the changes in the scales and the break points. Because of the provisions already made, we seek to remove the interim period.

Amendment agreed to.

Mr. Robert Sheldon: I beg to move Amendment No. 88, in page 39, line 8, after 'year', insert
'or the use of it has been preponderantly business use'.
The amendment concerns the position of the employee whose business use of the car is more than 25,000 miles. It is a response to representations made to me by the Motor Agents Association as well as to comments made in Committee and other representations.
The result of the amendment is that if a car is used by an employee for a business mileage of more than 25,000 miles in the year half of the scale benefit will apply. If the car is not available for the whole year the figure of 25,000 miles will be proportionately reduced. It is intended to meet the case of the heavy business user of the car. On a number of occasions the example has been given of a salesman whose business use is so extensive that the availability for private use is limited.
I think that the amendment meets the representations made and should find favour with the House.

Mr. David Howell: We do not agree with the Financial Secretary. We do not think that the amendment

meets the needs of the industry or of the situation. But we have a number of amendments which we shall seek to press when we read Schedule 7, and that may be a more opportune time to express our strong feelings on the matter.

Mr. Lawson: I should like to draw attention to the appalling English that the Treasury draftsman has used. The key word here is "preponderantly", which is a comparative term, as is clear from the Oxford English Dictionary. Yet the concept here is absolute, not comparative. The 25,000 miles is not compared with any other mileage. This is not an irrelevant point, because in connection with car mileage in another part of the Bill we must deal with substantial or insubstantial use. This is a term that may or may not be relative. We have sought on several occasions to get guidance from the Government as to the meaning of substantial and insubstantial.
It does not help us when words that have a clear meaning in English are used by the Treasury to mean something wholly contrary to their English meaning. It makes the Opposition's task of scrutinising this legislation almost impossible when the way in which it is written is in no language known to man, and certainly no language known to Englishmen.

Amendment agreed to.

Schedule 7

TAXATION OF DIRECTORS AND OTHERS IN RESPECT OF CARS

Mr. Robert Sheldon: I beg to move Amendment No. 89, in page 127, line 24 leave out from beginning of line to end of line 30 on page 128 and insert—

TABLE A


CARS WITH ORIGINAL MARKET VALUE UP TO £6,000 AND HAVING A CYLINDER CAPACITY



Age of car at end of relevant year of assessment


Cylinder capacity of car in cubic centimetres
Under4 years
4 years or more



£
£


1,300 or less
175
120


More than 1,300 but not more than 1,800
225
150


More than 1,800
350
235

TABLE B


CARS WITH ORIGINAL MARKET VALUE UP TO £6,000 AND NOT HAVING A CYLINDER CAPACITY



Age of car at end of relevant year of assessment


Original market value of car
Under 4 years
4 years or more



£
£


Less than £2,000
175
120


£2,000 or more but less than £3,000
225
150


£3,000 or more but not more than £6,000
350
235

TABLE C


CARS WITH ORIGINAL MARKET VALUE MORE THAN £6,000



Age of car at end of relevant year of assessment


Original market value of car
Under 4 years
4 years or more



£
£


More than £6,000 but not more than £10,000
500
335


More than £10,000
800
535

This is the main amendment putting forward the new scale that has been arrived at following consultations with the motor industry. It sets out the new scale break-points at 1300 cc and 1800 cc. There is a reduction in the number of break-points generally as set out in the Amendment Paper. The changes result from the anxieties that were represented to us by the industry, and which we naturally took into account.

There were a number of statements about the degree of danger to the industry, some of which were somewhat exaggerated. It was said that there would be a certain amount of down-trading to smaller cars. In fact, we do not happen to be producing the numbers of small cars that would be required as a result of that down-trading, but such matters had to be taken into account.

We had to tae into account the representations that were us about damage to the industry even though they may have been submitted in an exaggerated form.

As for total revenue from these benefit provisions, we shall now get from the altered provisions about two-thirds of the revenue that was expected to be received—namely, about £80 million instead of the £125 million that was expected when the Bill was introduced. As part of the new arrangements we are

dispensing with the interim half level of the scales for 1977–78. The purpose of the half scale was to prevent the too sharp rise that could have resulted in considerable disadvantage to people paying substantially increased tax on their benefits. As a result of these changes, that sharp rise will not occur.

Probably the most important point to be made at this stage is that the new scales should not take more in tax in total than does the existing scheme from those taxpayers who are now paying the correct amount of tax by reference to their private mileage. The increase will arise in respect of those who have not been paying the correct amount of tax in relation to their private benefit.

Mr. Viggers: How do you know?

Mr. Sheldon: It is necessary only to look at the statistics and to make an estimate. One can make an estimate of the amount of revenue that should be received by the Exchequer and one finds that, owing to the inexact system of checking the benefits declared by companies, there has been a shortfall. Those people who have been paying properly by reference to their private use will not pay any increased tax as a result of the changes.

Mr. Lawson: What will be the total increase in revenue in a full year as a result of the Bill going through with this amendment, and what would have been the total increase in revenue in a full year had the Bill gone through as originally drafted?

Mr. Sheldon: I thought that I had given that figure. It was £125 million as originally drafted and £80 million as it now is. The industry has welcomed these changes. It accepts the fact that we attach importance to stability in the industry, and therefore we hope that the amendment will be agreed.

Mr. David Howell: It cannot be said that these amended figures flow directly from pressure by the Opposition in Committee because, even before we arrived in Committee upstairs, the idiocy of the original Schedule 7 had dawned on the Government Ministers, and indeed on the motor industry. In Committee we were merely able to point to the further difficulties in which the Government would find themselves if they proceeded with the


original proposals. We were told at every point that talks were proceeding in Whitehall and in the companies and that from those discussions in due course would arise a new formula. This is the new formula that has emerged.
My hon. Friend the Member for Blaby (Mr. Lawson) said that Amendment No. 88 was not in English. Certainly Amendment No. 89 seems to have slipped into a foreign tongue because a close examination of Table A makes a nonsense of it. No doubt the Financial Secretary will be moving the necessary amendment to cover that matter. I understand that Table B is for cars with rotary or Wankel engines or engines of similar design. Perhaps the Financial Secretary will say why we need to have that table changed.
These are the new figures to be negotiated. We shall later be pressing a number of amendments on this point.

12 midnight

Mr. Fairbairn: I do not pretend to be a mathematician, and therefore this amendment means extremely little to me. I understand English, so the remarks made by my hon. Friend the Member for Blaby (Mr. Lawson) have more validity. I appreciate the difficulty of anybody understanding the amendment as written, because in relation to claims in respect of a car with an original market value of up to £6,000 with a cylinder capacity of 1300 c.c., or less one gets four years for that. I do not know whether that is a penalty. If the exercise involves more than 1300 c.c., one gets even more than tour years. I take it that four years is a minimum sentence.
Are we to have, as we had with the cherished numbers system, the prospect of lots of inspectors making sure that no one cheats? When someone declares his engine to be 1300 c.c. will there be a lot of little men opening it up to check its cubic capacity? As I understand it, the manufacturer's version of the cubic capacity is not necessarily in accordance with that provided by the Department at Swansea. Will there be a new inspectorate to make sure that this terrible cheating which we are told is liable to happen with number plates and the blondes who drive the cars bearing those plates will not happen here? Will another

branch of the bureaucracy check up to make sure that none of us gets more than four years when we should get £150?

Mr. Newton: The Financial Secretary cannot be allowed to get away with saying that the problems have been exaggerated and that he has done something to help. He has come to the conclusion that the levels imposed were 50 per cent. too high. He said that the figure which would be raised under the original proposals was 50 per cent. higher than he is now suggesting. That represents a major error.
The hon. Gentleman has conceded that his original proposals were damaging to the motor industry. The maximum addition to earnings under the original proposals was to have been £3,400 a year for the most expensive car. Under the amendment it will be only £800 a year. It was reduced because Rolls-Royce halted its entire investment programme. That prompts two questions. First, how did the Minister come to make the original proposal? Second. has Rolls-Royce restarted its investment programme?

Mr. Geoffrey Robinson: In Committee we made certain representations to the Government. I believe that the amended proposals have been widely and favourably accepted throughout the motor industry. This is not the time to carry on with these churlish party political points but to state that the new proposals are accepted by the industry and that in three aspects they show an extension with industry of the same spirit of co-operation as the Government have established with the trade unions. The co-operation with industry is as vital to the successful management of our industrial policy as is the co-operation we have established with the trade unions.
The break points have been established with special reference to the interests of the British-owned sector of the motor industry. I make no apology for saying that that is a wholly good sign. It may be discriminatory against and slightly less favourable to the foreign-owned motor interests in this country.
The rates are now extremely generous and are probably a reflection of the fact that the industry may have exaggerated


the potential impact of the original proposals on our exports, on domestic sales and on employment, which is probably more important than anything else.
It is easy for an industry to exaggerate when it is responsible for the investment of tens of millions of pounds in new Rover, Jaguar and Rolls-Royce products. In that sense I declare an interest. Those investment decisions also involve thousands of jobs. Despite the concessions that have been made, and despite the pressures from those with economic and constituency interests, the Government have held out on the structure of the tax. The structure will enable us to see in due course whether the industry exaggerated or whether the Government under-estimated. In the light of that experience, the Government can move the tax upwards if required and get back the revenue which we can justifiably bring into the Exchequer without inflicting the severe damage on the industry which might otherwise have been incurred.
For those reasons, with that future development in mind, my hon. Friends and I, without making churlish party political points and totally irrelevant criticisms, welcome the new proposal.

Mr. Lawson: The speech we have just heard from the hon. Member for Coventry, North-West (Mr. Robinson) will have been welcomed by all who believe in the corporate State. It will have been detested by anyone who believes in the principle of justice, equity and fairness to the individual. Hon. Members on the Government Benches may laugh, but I shall demonstrate to their satisfaction, if they are fair-minded, why that is so.
The hon. Gentleman said that at last accord had been reached with the motor industry comparable to that which had been reached with the TUC; the figures were satisfactory to the motor industry —I take his word for that—and therefore they were right. But that has nothing to do with it. The Government have said—and a good case can be made for it—that benefits in kind are a form of income and should be taxed as income. The only fair way to look at this is to ask what is the true value to the individual of the use of a motor car and to

tax him on that value. That is the way of fairness and equity.
The hon. Member for Coventry, North-West could not care less what is the value of the use of a motor car to the individual taxpayer. That does not matter. He can pay any amount of tax, perhaps too little, perhaps too much, but as long as the motor industry is satisfied, it is all right. That is the corporate State, and I hope that we shall have nothing to do with it.

Mr. Parkinson: I support my hon. Friend the Member for Blaby (Mr. Lawson). When we discussed the clauses to which the schedule is attached, we pointed out to the Government that the changes here being made were for the purpose of removing complication, producing a simpler system for assessing benefits and achieving fairness. We also pointed out that the proposals would be extremely damaging to industry. The Government said that the system would be simpler and fairer, and we analysed those two claims.
The present system is extremely simple. Anyone who drives a business car has to report the expenses of the car and to agree the proportion of time for which he personally uses that car for private purposes. Every taxpayer who has a business car has to submit an assessment to the Revenue and to agree the private usage.
We must have here tonight as gullible a couple of Treasury Ministers as have ever held office in the Treasury because the Revenue has only to tell them something for them to believe that it is incontrovertible. They have been told by the Revenue "This system militates against us and the taxpayers are getting away with it. Therefore we should change the whole system".
We have had no proof. The Financial Secretary gave us vague generalisation about data being available, but it is the individual taxpayer who is submitting his claim to the Revenue. The Revenue has wide powers, and private benefit has to be agreed. In future we shall have three categories, and the Revenue will still be dependent on the taxpayer for information as to whether he keeps the car near his home. So the Revenue is still in the hands of the taxpayer. The only reason for the elaboration is that the


Revenue has convinced the Financial Secretary that the present system puts it at a disadvantage. We do not think that it is at a disadvantage. The new system will be infinitely more complicated than the old.
We ask whether it is much fairer. That is the last consideration which has entered the Government's mind. It does not matter to them whether it is fair.
I shall be better off under this proposal, because the private benefit assessable on me will be smaller, but the private benefit itself will not have changed. Tomorrow it will be the same as it was last week, but, thanks to the Government, I shall be told that it is less. It is not. It is just the same.
The Government have introduced a totally arbitrary range of so-called benefits, to which the hon. Member for Coventry North-West (Mr. Robinson) referred. It has nothing to do with justice. The Government have fixed a range of scales and have been told by the motor industry that those scales would damage the motor industry, and the Treasury have said, "All right, we shall change the scales. We must look after the motor industry."
There is no question of what is right or wrong for the taxpayer. They must fix something which will allow the British motor industry to stay in business. British Leyland will be able to put up the price of the Daimler to £10,000 and people will not claim increased benefit as a result.
This is supposed to be less complicated but is undoubtedly more complicated. It has been said that these arrangements are more just and fair to make sure that the taxpayers pay a proper figure for a benefit. That idea has now been totally abandoned by the Government. They are interested only in arriving at a range of scales which will suit the motor industry.

Mr. Robinson: During Committee stage, all the Opposition MPs with one undistinguished exception argued forcibly that the scales and rates would or could badly damage the motor industry. Is the hon. Member now saying that he would prefer the original scales and break points? Would he say whether he accepts and welcomes these revised proposals?

Mr. Parkinson: I made the argument in committee about how damaging these proposals would be to the motor industry, but what we are discussing is not what is good or bad for the motor industry but the private benefit to the individual of the use of a company car. I thought the Government proposals were damaging and I am glad they have changed them—

Mr. Robinson: Let us hear that.

Mr. Parkinson: If the hon. Member will allow me to continue. They will be less damaging to the motor industry, but we are discussing not that but the question of arriving at an arbitrary level for fixing benefit, and the Government are trying to claim credit for solving a problem which did not exist.
12.15 a.m.
Under the old system the British motor industry was not threatened. Taxpayers' assessments were agreed between the taxpayer and the inspector. There was no problem for the motor industry. The Government come along with a set of half-baked proposals which are obviously not propertly thought out, which have nothing to do with justice or fairness. Suddenly they wake up to that fact and invite us to step back and be filled with admiration for the fact that they have noticed that their proposals will damage the industry.
I hope that Labour Members, instead of sniggering, will realise that they owe me an apology. My point was a perfectly valid one. These proposals will be less damaging for the motor industry. But the original arrangements, which these proposals supplement, were not damaging at all. I hope that the Government will not regard themselves as having produced some major achievement. These proposals are not fair. They are extremely complicated, far more so than those which previously existed. I do not believe that the Government have any cause to congratulate themselves in that, because they threatened to damage an industry which was not in danger, they are now lessening that threat.

Mr. John Wakeham: I did not have the advantage of being a member of the Committee but I am bound to say that these amendments are better than the proposals originally put forward.


They will do less damage. People will pay less tax. They are, however, still unsatisfactory and illustrate the disadvantages of trying to deal with the matter in this way.
There are three major defects. First, there is the point that this is a grave departure from a simple principle of taxation, namely that we should tax people on the cost of a benefit to the employer rather than deal with matters, unless there is no other way, on the basis of the so-called benefit to the employee. If we stick to this principle we shall end up, more or less, with a better system.
The second objection is that, basically, those who work out their motoring expenses as between private and business use accurately cannot obtain a correct assessment for tax based on the true facts. If there is to be an arbitrary system such as this, it ought to be applicable only to those not able properly to present the position and tax paid accordingly. There are those who keep meticulous records and are prepared to substantiate exactly the amount of mileage claimed for private and business use. In those cases there is no ground for arguing that they should be taxed on any other than the correct basis. They may be the minority, but if they can present the information they should be properly treated.
The third thing that ought to be said, particularly to Labour Members, is that we have left those taxed under Schedule D with basically the same system as before while those taxed under Schedule E will have this arbitrary system of benefits, using a method other than the cost to the employer. Whatever the merits or demerits of the proposed system —and the Government feel that it has merits—it will not apply to all.
Once more this brings into focus the fact that one set of income earners are taxed on the basis of Schedule D while another set is taxed on the basis of Schedule E. This is not a satisfactory system. There are many cases in which it is considered unfair. I agree that we cannot unify the rules immediately but a move such as this makes the difference still wider and it not one which I welcome.

Mr. David Howell: This sort of debate has been useful, demonstrating a number of valid points. The first is that this is

just change for change's sake, and no great advantage accrues. On the contrary, great complications are caused. We started from square one, with no threat or damage to the motor industry. We then advanced to square two, with maximum threat and damage. At square three we are little way back towards square one, with some of the damage slightly reduced.
I do not know whether the hon. Member for Coventry, North-West (Mr. Robinson), who speaks on these matters with great expertise, felt that he was coming here to achieve that kind of thing. He has joined in helping to reduce slightly the damage that otherwise would have been imposed on the industry of which he was such a prominent member.

Mr. Robinson: When I came to Parliament I was honoured to join a party which has done a great deal for the motor industry, in the teeth of the defiance of the Conservative Party, which did its best, in the case of British Leyland and then Chrysler, to destroy that industry.

Mr. Howell: The hon. Gentleman at this late hour is letting his romanticism about the motor manufacturing industry get a little out of control. As a result of a great many efforts, the Government to whom he gives support are now doing a little less damage to the motor industry than they were a few weeks back. That is all that has been achieved by the new Schedule 7.
As my hon. Friend the Member for Blaby (Mr. Lawson) says, it has nothing to do with income tax any more. At least previously the system was based on a persons' income and the income tax system. It has now turned into a car tax. It is a tax related to the manufacture of a certain size of car. It has been foisted on to the income-earning public and also on to the motor industry. It carries us no further forward and a good way backward in regard to fairness and equity in taxation, and in regard to the motor industry and simplicity of administration.
I suspect that the Government are now secretly regretting very much indeed that they set out on this crazy course and wish they had not embarked on this kind of schedule. The old arrangements were better. This arrangement achieves noth-


ing. We have no admiration for it on this side at all, nor any praise for the Government's great triumph in slightly reducing the damage produced by their original proposals.

Amendment agreed to.

Amendment made: No. 90, in page 128, line 34, leave out '£5,000' and insert '£6,000'.—[Mr. Robert Sheldon.]

Mr. Robert Sheldon: I beg to move Amendment No. 91, in page 129, line 14, at end insert—

'Car used preponderantly for business purposes

2A.—(1) The cash equivalent derived from Table A, B or C is to be reduced (or, where paragraph 2 applies, further reduced) by half if it is shown to the inspector's satisfaction that the employee was required by the nature of his employment to make, and made, use of the car preponderantly for business travel, which means that such travel must have amounted to at least 25,000 miles in the relevant year.

(2) In relation to a car which for part of the year was unavailable in the sense of paragraph 2 above, the figure of 25,000 miles above mentioned is proportionately reduced'.

Mr. Speaker: With this we may take the following amendments to the proposed amendment:
(a) in subsection (1) leave out '25,000' and insert '15,000'.
(d), in subsection (1) leave out '25,000' and insert '20,000'.
(f), in subsection (1) after 'miles', insert
'or 50 per cent. of his total mileage in the car (whichever is the less)'.
(g) in subsection (1), after 'miles', insert
'or 66⅔ per cent. of his total mileage in the car (whichever is the less)'.
(h) in subsection (1), after 'imles' insert
'or 75 per cent. of his total mileage in the car (whichever is the less)'.
(b), in subsection (2), leave out '25,000' and insert '15,000'.
(i), in subsection (2), leave out '25,000' and insert '20,000'.
(c), in subsection (2), leave out '25,000 miles' and insert
'12,000 miles as four fifths of the total actual mileage'.

Mr. Sheldon: The amendment deals with the relieving provision that we are

proposing concerning cars doing a business mileage in excess of 25,000 miles a year. We are proposing that such cases be assessed on the level of half-scale benefits. This follows a number of representations made to us concerning heavy heavy business use of cars. I mentioned that in dealing with an earlier amendment.
If there are any questions on the amendment I shall be glad to answer them.

Mr. MacGregor: I wish to speak to amendments (a) and (b) to the proposed amendment. As the Financial Secretary said, the main amendment has been brought forward to deal with a point made very forcibly in Standing Committee and also by outside interests, namely, that under the original proposals the people who were most to suffer were those who most used the car as a tool of the trade. It was not just the car salesman. It was applied to many others for whom the car was not only an essential item of use in business but by whom it was mainly used for business purposes.
As my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) said earlier, there are many people who will benefit under the Government's proposals—generally those who have over 50 per cent. private use, I imagine, but insufficient business use to come under the other clauses in the Bill. We have a situation in which quite a number of people who were less justified in getting reductions were getting them, whereas the people who were really to be hit were those for whom the car was fundamentally and almost totally provided for business purposes. They included many people who did not want to use their cars at the week-end after having driven them all week and people who used their cars so frequently that they had to buy a second car for their wives.
The Government have attempted to deal with this situation by relating their amendment to a number of miles rather than a proportion of private use to total use because they believe that this will make it easier for companies—and the Government themselves—to check business mileage. But the Government are again out of tune with reality. Their


amendment has been framed without consultation with the interests affected and they are again proposing the wrong figure.
I am extremely critical of the way in which this figure of 25,000 miles has been arrived at. It is simply an arbitrary figure. It does not deal properly with the point made in Committee and conceded by the Government in the production of their own amendment.
I have checked with some of our biggest companies with large forces of sales representatives. One firm with a household name conducted a survey of 1,000 sales representatives after the Government amendment was tabled and concluded that only 35 per cent. of them would qualify. Yet all these men are doing the same job. Our amendment would come much nearer to covering them all.
In another company, the Government amendment would cover 25 per cent. of sales representatives and in a third major firm, which employs many representatives, none of them would be covered by a 25,000 mile limit. Since all these representatives are using their cars to do the same job, more of them should be included in the concession granted by the Government.
The 25,000-mile figure does not take account of geographical differences in many parts of the country. In areas with substantial lengths of motorway—and there cannot be many—a number of sales representatives will come into the category proposed by the Government. But in rural areas such as my own, where it can take a day for a sales representative to do two jobs, and there are not long stretches of motorway, they will not clock up 25,000 miles—yet they are doing the same job and using their cars all the time for business purposes.
From our brief survey, the accuracy of which is confirmed by the CBI, we have concluded that 15,000 miles would be a much more accurate figure. The Government have gone some way to meeting our objections, but have failed to get the figure right. I hope that even at this late stage they will take this opportunity of getting it right.

12.30 a.m.

Mr. Fairbairn: I am concerned about the definition which the Government are seeking to force upon us in this matter.

They say that a car should be used "preponderantly" for business purposes.
This is an important phrase and presumably it is intended to mean something. I do not know who selected the word "preponderantly" and why it should mean that this travel must have amounted to 25,000 miles in the relevant year. In fact, its meanings include a situation in which one exceeds another in weight. That presumably relates to whether a car is heavier when it is being used for business purposes.
Secondly, it means a superiority or excess in moral weight, power, influence or importance. I should not have thought that there was anything morally superior in using it for business purposes. The illustration refers to the Ministry having had the great preponderance of popular opinion at its back. That could not be said of this Ministry. Perhaps that definition is insufficient.
The third way in which the word is defined is that in becoming established it became noxious—preponderantly noxious. I should have thought that that applied in this case.
When the Treasury uses arbitrary figures and words wrongly it is in grave peril of doing a major injustice. It is no good saying that a line must be drawn somewhere. The line is drawn at a point which makes some people eligible, or preponderantly eligible, and others preponderantly ineligible. I think that the line which has been drawn is preponderantly improper. It does a preponderantly manifest injustice to those people who do the same job but who travel different distances.

Mr. Newton: My amendment seeks to substitute a different absolute figure and to introduce the only concept capable of dealing with the point about preponderant use. It seeks to apply a proportionate approach by comparing the business mileage with the total mileage done by the car. I suggest that the proportions may either be one-half, two-thirds or three-quarters. I do not know what is the right figure. I am prepared to listen to what the Financial Secretary says. Apart from the use of the word "preponderantly", the only fair procedure would be to compare the business mileage with private mileage.
I should like to back up what was said about the effect of this proposal in different areas. The representations made by the Confederation of Employee Organisations to the Financial Secretary contained the result of a survey of a large and well-known firm with 400 sales representatives spread throughout the country. An assessment was made of the different mileages covered by those representatives in different parts of the country. The figures will interest Government supporters as it is not only the people living in the Conservative rural areas who will suffer from these proposals.
The figures applied to representatives doing the same job in different parts of the country, getting through roughly similar workloads. The representatives in Mid-Wales covered 30,500 miles a year. Their tax problem is halved. Those in North Scotland covered 24,300 miles. They do not qualify. Those in Cambridge and North Suffolk covered 24,900 miles. If they cover a further 100 miles a year their tax burden will be halved. Those in West Wales covered 33,800 miles.
We now come to the low figures. The representatives in South-East London covered 10,100 miles. They have no chance of escaping from the Chancellor's extra taxation. Those on Teesside covered 11,000 miles. The Leeds representatives covered 11,100 miles.
What fairness, justice, principle or equity is there in a tax system which has the following result in respect of people doing the same jobs and using the same 1½litre car: those in mid-Wales would be taxed on £125 a year benefit, while those living elsewhere would be taxed on £225 a year? That cannot be right. There is no possible justification for that. It cannot be right for one man to pay twice as much tax as another when both do the same job and use the same car. I do not see how that can be defended. I look forward to hearing what the Financial Secretary has to say about that.

Mr. Wakeham: I should declare an interest. My company employs 50 salesmen who drive motor cars and average 25,000 miles a year—some lower and some higher. Those who do more than 25,000 miles a year will have less of a tax burden, and therefore a better take-

home pay, than those who do not drive 25,000 miles a year.
My company is by no means certain that those who drive over 25,000 miles a year are better salesmen than those who drive less than that mileage and whose take-home pay will be varied by these new proposals in an unreasonable way. That will present my company with problems.
The figure of 25,000 miles is much too high. I calculate that it means 500 miles a week or 100 miles every working day. That represents three and a half hours of driving each day. People outside this House work a seven or eight-hour day. Therefore, a man may spend half of every working day driving. If he has to spend any days in the office dealing with paper work, he will probably spend more time driving on the other days.
My company's objective is to sell its products. Therefore, its aim is to reduce the mileage covered by its salesmen in order to increase the time that they can spend selling the company's products to customers. This proposal goes counter to everything that the management of the company is trying to achieve. It will mean that salesmen who spend more of their time selling rather than driving round the countryside will be put at a disadvantage compared with those who spend more of their time driving.
There is no doubt that towards the end of the financial year salesmen and others will be watching their mileage to make sure that they do not fall just below the 25,000 miles level and that next year there will be proposals in the Finance Bill to give marginal relief and a lot of other ridiculous nonsense which could be avoided.

Mr. Robert Sheldon: The hon. Member for Maldon (Mr. Wakeham) did not serve on the Finance Bill Committee for reasons which we well understand. Had he served on that Committee, he would have heard his hon. Friends pressing the need for a provision for people who achieve a high mileage. The argument, strongly put forward in Committee, was that certain categories of people used cars so extensively for business purposes that a special concession should be given for that purpose. The result of that argument was that we decided to deal with these exceptional cases.
We are not concerned with the average case. If we were to make special provision for the average case, the whole of the benefits in kind legislation would need to be changed. This is an exception for a small number of people who have an exceptionally high level of business use. An exception is made not for most people, but for an unusual and limited number of people. We may argue about the definition of this limited number of exceptional users of motor cars for business use, but clearly it can be nowhere near the average level.
The hon. Member for Braintree (Mr. Newton) rightly pointed out that the average level of use is 14,000 or 15,000 miles. That fits in closely with the information that I have available to me from the National Travel Survey of 197273, which showed that average business use was 14,000 or 15,000 miles in that year. That, I think, would correspond broadly with the sort of indications which most of us have available.
What we are providing is a means of assesing those users who have a wholly exceptional amount of business travel. It was argued strongly in Committee that those people who had an exceptionally high level of business use were not in a position to drive their cars as much at weekends, or would not even wish to use their cars for pleasure or recreation, unlike those who had less business mileage.

Mr. MacGregor: The Financial Secretary said that we argued purely for those with exceptional high mileage, whereas we argued for those with exceptionally high business use. Some of them may have had exceptionally high mileage but it is exceptionally high business use which is the point which matters. There are many people who use their car a lot but who have to have it outside an office and there are those who will never get near 25,000 miles.

Mr. Sheldon: I can understand the hon. Gentleman's point of view that it is exceptional business use rather than exceptional mileage but he must accept that we are talking about exceptional people, people who make either exceptional use of their car or have exceptional mileage. We are not talking about the ordinary person who makes use of his car

for 14,000 or 15,000 miles and is not exceptional either in the amount of business use or the amount of his business mileage.

Sir G. Howe: Will the Financial Secretary not understand the quite astonishing propositions to which this kind of legislation is committing him? He said that we are trying to make provision for those who make exceptional business use or drive exceptional business mileage. Immediately he has got two distinct categories and he is trying to encapsulate them in one group. There is no reason, surely, why a clergyman who spends his life going from parishioner to parishioner in an urban parish should have a lesser tax advantage than the clergyman in a rural parish who travels larger distances? The Financial Secretary's latest cockshy is trying to resolve the insoluble by putting people into compartments when they should be treated separately. He will be driven, by each argument he puts, to some new absurdity. This is one of the difficulties we have in trying to consider this legislation within two or three days of its publication. The more we look at this the more lunatic it is seen to be. Any alternative to putting people into compartments is bound to be equally absurd.

Mr. Sheldon: I can think of few things more absurd than attempting to assess use on the basis of hours spent in a car. We well know that the only way in which use is generally computed is by means of mileage. That is a point which has been put to us, and I am sure that it has been put in representations to the right hon. and learned Gentleman and others. It is the only way in which one can make an assessment of this kind.
That is what we have done in response to representations made in Committee, more importantly in response to representations by those people who have direct experience of this matter and, most importantly of all, in response to the Motor Agents Association which asked for this precise concession. It asked for 25,000 miles and a reduced scale. We looked at this and we thought that the association had a good point. I heard the arguments in Committee. We received representations elsewhere for the exceptional cases and we felt that a concession


of this kind was justified, and we produced an amendment for the consideration of the House.

Mr. David Howell: Having listened to the Financial Secretary I do not know which situation to fear most, either that where he rejects our representations or that when he claims to have understood them and rushes to produce an amendment which turns out to be utterly wrong and unrelated to the case. The one thing we could agree on was that we were seeking a way in which those with an exceptionally high level of business use could be protected against the full rigours of the new provisions. But how or why the Financial Secretary leaps from that to these mileage calculations he has not explained.
12.45 a.m.
The Financial Secretary has left us in an extraordinary position. Insead of being based on a proportion of use—the word "preponderantly" which we debated earlier would seem to imply that—the assessment is to be based purely on mileage. Obviously, the amount of mileage is in an almost random or purely chance way connected with the intensity of use. In areas of high population there will be less mileage, whether the person concerned is a clergyman, as in the example given by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), or a retail salesman. In areas of low population the mileage will be far higher.
For reasons which the hon. Gentleman has not shared with the House, there is now is to be a bizarre discrimination between the retail salesman slogging round Mid-Wales and the retail salesman slogging round, for example, my own constituency of Guildford. These two people will work equally hard. They will sweat away during the week. They will hardly use their cars at the weekend because they will be exhausted. Each will have visited as many customers as the other. Yet for some reason totally unexplained a substantial income tax benefit is to accrue to the salesman in the less populated areas.
As my right hon. and learned Friend said, this is the road to a higher lunacy.

We have not been told why it should be so. The Financial Secretary says that the matter was discussed with the motor industry, but the motor industry has supplied a brief to all hon. Members, as far as I know, saying that it thinks that this is entirely wrong and is not the basis on which help for those with exceptionally high level of business use should be given. The industry's representatives say—and I think they are right—that it should be something very much in line with our amendment, and that if one is to make a step in this direction at all, for heaven's sake choose a level of mileage rather fairer to all people in different parts of the country, the areas of high population and those of low population—MidWales and West Wales as well as Leeds, Teesside and South-East London. That is what they say, and they add that the sort of figure they have in mind is 15,000 miles, which is what we propose.
We believe that the Financial Secretary probably misheard what was said in Committee. He seems to have misheard what was said by the motor trade. He has rushed off and produced an amendment which has created an even more bizarre and anomalous state of affairs than the one which existed before. As my right hon. and learned Friend said, he has now trapped himself in a situation from which, whichever way he turns, it is impossible to get it right.
It would be better to take all these proposals back. Plainly, both the Financial Secretary and the Chancellor are wishing that they had never embarked on this chaotic venture which will lead to so much unfairness, injustice, arbitrary calculation, administrative complexity and difficulties and inequity of the kind with which we have become so familiar in Socialist legislation from this Government. We can find nothing to say in support of it, and I feel that it would be right if my hon. Friends pressed the amendment to a Division to demonstrate the absurdity of the Government's proposal.

Amendment proposed to the proposed amendment: (a), in subsection (1), leave out '25,000' and insert '15,000'. —[Mr. MacGregor.]

Question put, That the amendment to the proposed amendment be made:—

Question accordingly negatived.

Amendments made: No. 91, in page 129, line 14, at end insert—

'Car used preponderantly for business purposes

2A.—(1) The cash equivalent derived from Table A, B or C is to be reduced (or, where paragraph 2 applies, further reduced) by half if it is shown to the inspector's satisfaction that the employee was required by the nature of his employment to make, and made, use of the car preponderantly for business travel, which means that such travel must have amounted to at least 25,000 miles in the relevant year.

(2) In relation to a car which for part of the year was unavailable in the sense of paragraph 2 above, the figure of 25,000 miles above mentioned is proportionately reduced'.

The House divided: Ayes 23, Noes 124.

Division No. 256.]
AYES
[12.49 p.m.


Beith, A. J.
Howell, David (Guildford)
Percival, Ian


Buck, Antony
James David
Ross, Stephen (Isle of Wight)


Cooke, Robert (Bristol W)
Lamont, Norman
Wakeham, John


Cope, John
Lawson, Nigel
Weatherill, Bernard


Fairbairn, Nicholas
MacGregor, John
Winterton, Nicholas


Farr, John
Newton, Tony



Glyn, Dr Alan
Page, Rt Hon R. Graham (Crosby)
TELLERS FOR THE AYES:


Gow, Ian (Eastbourne)
Parkinson, Cecil
Mr. Spencer le Marchant and


Howe, Bt Hon Sir Geoffrey
Penhallgon, David
Mr. Carol Mather.

 


NOES


Abse, Leo
George, Bruce
Perry, Ernest


Archer, Peter
Golding, John
Richardson, Miss Jo


Atkinson, Norman
Grant, John (Islington C)
Robinson, Geoffrey


Barnett, Guy (Greenwich)
Hardy, Peter
Rodgers, George (Chorley)


Bates, Alf
Harper, Joseph
Hooker, J. W.


Benn, Rt Hon Anthony Wedgwood
Harrison, Walter (Wakefield)
Roper, John


Bennett, Andrew (Stockport N)
Hooley, Frank
Sandelson, Neville


Bidwell, Sydney
Huckfield, Les
Sedgemore, Brian


Boothroyd, Miss Betty
Hughes, Robert (Aberdeen N)
Selby, Harry


Brown, Robert C. (Newcastle W)
Irving, Rt Hon S. (Dartford)
Shaw, Arnold (Ilford South)


Brown, Ronald (Hackney S)
Jackson, Colin (Brighouse)
Sheldon, Robert (Ashton-u-Lyne)


Butler, Mrs Joyce (Wood Green)
Janner, Greville
Short, Rt Hon E. (Newcastle C)


Callaghan, Jim (Middleton &amp; P)
Jeger, Mrs Lena
Silkin, Rt Hon John (Deptford)


Carter, Ray
Johnson, Walter (Derby S)
Silkin, Rt Hon S. C. (Dulwich)


Carter-Jones, Lewis
Kerr, Russell
Silverman, Julius


Cartwright, John
Kinnock, Neil
Skinner, Dennis


Castle, Rt Hon Barbara
Lamborn, Harry
Smith, John (N Lanarkshire)


Clemitson, Ivor
Lamond, James
Snape, Peter


Cocks, Michael (Bristol S)
Latham, Arthur (Paddington)
Spearing, Nigel


Coleman, Donald
Lestor, Miss Joan (Eton &amp; Slough)
Stallard, A. W.


Corbett, Robin
Lipton, Marcus
Stewart, Rt Hon M. (Fulham)


Cox, Thomas (Tooting)
Loyden, Eddie
Stoddart, David


Crawshaw, Richard
Luard, Evan
Tinn, James


Cronin, John
Lyons, Edward (Bradford W)
Tomlinson, John


Crowther, Stan (Rotherham)
MacFarquhar, Roderick
Torney, Tom


Cryer, Bob
Madden, Max
Walker, Harold (Doncaster)


Cunningham, G. (Islington S)
Mallalleu, J. P. W.
Ward, Michael


Davidson, Arthur
Marks, Kenneth
Watkins, David


Davies, Bryan (Enfield N)
Marquand, David
Weetch, Ken


Davies, Denzil (Llanelli)
Marshall, Jim (Leicester S)
Weitzman, David


Davis, Clinton (Hackney C)
Maynard, Miss Joan
White, Frank R. (Bury)


Deakins, Eric
Meacher, Michael
Whitehead, Phillip


Dell, Rt Hon Edmund
Mendelson, John
Whitlock, William


Dormand, J. D.
Mikardo, Ian
Williams, Alan (Swansea W)


Douglas-Mann, Bruce
Morris, Rt Hon J. (Aberavon)
Williams, Alan Lee (Hornch'ch)


Ellis, John (Brigg &amp; Scun)
Moyle, Roland
Williams, Rt Hon Shirley (Hertford)


Evans, Ioan (Aberdare)
Mulley, Rt Hon Frederick
Wise, Mrs Audrey


Foot, Rt Hon Michael
Newens, Stanley
Woodall, Alec


Forrester, John
Orme, Rt Hon Stanley



Fowler, Gerald (The Wrekin)
Ovenden, John
TELLERS FOR THE NOES:


Fraser, John (Lambeth, N'w'd)
Owen, Dr David
Mr. Ted Graham and


Garrett, John (Norwich S)
Palmer, Arthur
Mr. Tom Pendry.


Garrett, W. E. (Wallsend)
Pavitt, Laurie

No. 244, in page 129, line 20, leave out 'paragraph 2 above' and insert 'the foregoing paragraphs".—[Mr. Robert Sheldon.]

Clause 60

POOLED CARS

1.0 a.m.

Mr. Robert Sheldon: I beg to move Amendment No. 92, in page 39, line 37, at end insert
'or by the employer on behalf of all of them'
The amendment enables an employer as well as his employee to claim that a


car is a pool car under the benefits-in-kind provisions. The point was made in Committee and we have met it in the amendment.

Amendment agreed to.

Clause 61

BENEFICIAL LOAN ARRANGEMENTS

Mr. Robert Sheldon: I beg to move Amendment No. 93, in page 41, line 5, at end insert—
'(6A) But on the employee's death—

(a) a loan within subsection (1) ceases to be outstanding for the purposes of the operation of that subsection; and
(b) no charge arises under subsection (3) by reference to any release or writing-off which take effect on or after the death'.
The amendment follows our undertaking to accept the principle of ensuring that when an employee in receipt of a cheap loan dies, the charge to tax in respect of the benefit he has been receiving from the loan comes to an end. If the loan is waived on or after death, there will be no charge to tax as a result of the waiver.

Amendment agreed to.

Mr. Robert Sheldon: I beg to move Amendment No. 94, in page 41, line 35, leave out from "year" to "and" in line 38 and insert
1978–79 and subsequent years; but for that year and 1979–80 the cash equivalent under that subsection instead of being the amount arrived at by applying Part II of Schedule 8 is that amount reduced by half.
The amendment phases the introduction of the charge to tax on cheap loans in a way that was represented to us. I think that it will meet with the approval of the House.

Mr. David Howell: We are dealing with the sort of loan that is taken out by tens of thousands of people. For example, commuters often get an interest-free loan for a season ticket. There are employees who get a loan for furniture when they first get married. Others may get a loan to tide them over especially difficult marital circumstances. Many of us have constituents in such positions. Those who have loans for season tickets to commute to London every day are to be found in their thousands in certain areas. They have been under threat from the Bill, which would have imposed

an additional tax upon them on the difference between the zero or low interest they were paying and the market rate of interest as calculated in a complicated and elaborate schedule.
We argued upstairs in Committee that this was a widespread additional impost on people who were already hard-pressed. The Government then agreed the small concession that the first £50 of interest should be disregarded. At an interest rate of 10 or 12 per cent., that would mean a loan of about £500 down to £350—about the price of a season ticket in many of the commuter areas. That might surprise some Labour Members below the Gangway, but perhaps it did not surprise some of those who live in commuter areas. I am referring to the electors of Thurrock who did not succeed in getting out to support the Labour Government today, many thousands of whom stayed at home or switched to other parties.
The Government's proposal was an attack on a great number of people, and the additional concession here is obscure. It certainly does not meet the worries of a large number of people. For the first two years—for 1977–78 and 1979–80—the cash equivalent is reduced by half, but that still leaves the de minimis provision of £50. It still means a liability for tax on the full amount.
The other worry is that we have still no provision to meet the transitional problem. Perhaps the Financial Secretary will explain why in a case where a person finds he has incurred interest of £51 the full amount is chargeable to tax, whereas someone with £49 gets away with it. Will there be proper transitional arrangements? There appears to be nothing to help those people and there is a great deal in the Bill to damage them. I hope that we shall have a further explanation of what the Government have in mind to meet this important point.

Mr. MacGregor: Although we have had two minor concessions on the clause, it appears that the Financial Secretary has not taken proper account of many of the persuasive arguments put to him in Committee.
I have two worries on these provisions. The provision which the Minister announced in Committee involving the first £50 of notional interest does not meet legitimate worries on the matter. Surely


it would have been more sensible to say the first £50 applies to everybody. I would have liked to see it higher. I think that a figure of £100 would have met all the problems of season ticket loans which are a legitimate way of trying to help people in the London area. But there is something strange in people being excluded from Clause 61 if the notional interest goes up only to £50, if thereafter they will meet the full brunt of Clause 61.
The second point relates to the transitional period in unscrambling loans. The rather marginal concession given in the amendment does not deal with the inconsistency in the treatment which the Government has shown as between the transitional arrangement and the tax relief on loans under the Finance Act 1974 and this arrangement. In that Act the transitional arrangement enabled people to unscramble large loans. We are now in a constructive situation in which some people will continue to obtain tax relief on loans to 1980–81 but will find in regard to notional loans that a different tax treatment will aply to them.
The whole of this shows therefore the inconsistency of the Government's treatment of the fringe benefit clauses. For some reason it has been said that airline employees who are able to draw a benefit in kind to enable their families to go on holiday at cheap rates should not have to pay the tax which the Government propose in the Bill. But people who have loans from their employers to pay for such things as season tickets are given only marginal relief which will not meet anything like their main problems. No further concessions have been made to them by the Government.
It is clear therefore that where people have been able to bring sufficient pressure to bear upon Labour Back Benchers, and where they are sufficiently strong in numbers the Government have made concessions. In other cases they have not. We welcome the Government's amendment to meet some of these points we made in Committee, but it demonstrates the inconsistency of the Government's approach and it does not go far enough.

Dr. Alan Glyn: The amendment deals with a matter which greatly affects my constituents. The crux of the matter concerns

the loan for the season ticket. The cost of travel has become an extraordinarily difficult problem. It has risen enormously. For many of my constituents it is more than £350 a year. The complicated system that the Treasury has worked out will mean that the £50 is far exceeded. The Government are particularly insensitive to the difficult problems which arise from the endeavour of the employers to help employees who have to pay for expensive season tickets.
For the Government to draw the line at £50 is unjustified. It is wrong that this loan should be consolidated with other loans which employers might give. It should be treated as a separate entity We are grateful to the Treasury for giving way on the point about concessions which are difficult to assess. We believe that loans for season tickets should be exempt since they are part of the cost which employees have to pay to get to work. I hope that the Government will consider such an exemption. It will be easy for the Revenue and the recipient to work out the amount of interest payable each year. I hope that the Minister will be able to assist the millions of commuters who come into London each day to do a first-class job of work.

1.15 a.m.

Mr. Robert Sheldon: The hon. Member for Guildford (Mr. Howell) and his hon. Friends made the same point about the de minimis exemption of £50. As a consequence of charging the full rate of tax on all the loans involved from a common date only half the benefit will be taxable in respect of loans made after 1974 and the effective de minimis exemption will be doubled until 1980–81. The effective de minimis exemption is equivalent to £100 for this period. That covers to some extent the point made by the hon. Members for Windsor and Maidenhead (Dr. Glyn), Norfolk, South (Mr. MacGregor) and Guildford.
Marginal relief is a problem more in appearance than in substance. The employer will make a loan of £50 or, in the transitional period £100, and instead of charging a reduced or nil rate of interest he can charge the official rate on that part of the loan which exceeds the amount not covered by the exemption. The employee will be able to get


the whole de minimis exemption free of tax without the problems of marginal relief.

Dr. Glyn: Does the Minister appreciate that it costs a commuter well over £350 a year for a season ticket, and he will be brought into the tax bracket in spite of the exemption?

Mr. Sheldon: The hon. Gentleman may not appreciate that we are talking about the interest on the loan and not the amount of the loan itself. What I have said meets his point.

Amendment agreed to.

Schedule 8

TAXATION OF BENEFIT FROM LOANS OBTAINED BY REASON OF EMPLOYMENT

Amendments made: No. 95, in page 130, line 13, at end insert 'and'.

No. 96, in page 130, line 15, leave out from 'partnership' to end of line 18.—[Mr. Robert Sheldon.]

Clause 62

EMPLOYEE SHAREHOLDINGS

Amendments made: No. 97, in page 42, line 44, at end insert
'or (d) the employee dies'.

No. 98, in page 43, line 25, at end insert—
'(8A) But no charge arises under subsection (7) by reference to any disposal effected after the death of the employee, whether by his personal representatives or otherwise.'.

No. 99, in page 44, line 20, leave out 'or (7)'.—[Mr. Robert Sheldon.]

Clause 64

EMPLOYMENTS SUBJECT TO SS. 55 TO 62

Amendment made: No. 101, in page 45, line 21, leave out from 'means' to 'with' and insert—

'(a) employment as a director of a company (but excluding, if he does not have a material interest in the company, employment as a full-time working director); or
(b) employment'.—[Mr. Robert Sheldon.]

Clause 67

INTERPRETATION OF THIS CHAPTER; SUPPLEMENTARY

Amendment proposed: No. 103, in page 48, line 11, at end insert

'(unless the employer is an individual and it can be shown that the car was made so available in the normal course of his domestic, family or personal relationships)'.—[Mr. Robert Sheldon.]

Mr. David Howell: Will the Financial Secretary explain this amendment?

Mr. Robert Sheldon: It concerns an employer who employs a member of his own family. If that employee used a car owned by the employer, he would normally be subject to the benefits-in-kind legislation, although he might be using the car because of family circumstances rather than as an employee. In that case there is a need for a relieving provision, and the amendment provides it.

Amendment agreed to.

Amendment made: No. 104, in page 48, line 12, leave out '58(5)(c)' and insert '58'.—[Mr. Robert Sheldon.]

Amendment proposed: No. 105, in page 48, line 31, at end insert—
'(8A) "Full-time working director" means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity.
(8B) A person shall be treated as having a material interest in a company—

(a) if he, either on his own or with any one or more of his associates, or if any associate of his with or without such other associates, is the beneficial owner of, or able, directly or through the medium of other companies or by any other indirect means, to control, more than 5 per cent. of the ordinary share capital of the company, or
(b) if, in the case of a close company, on an amount equal to the whole distributable income of the company falling to be apportioned under Chapter III of Part XI of the Taxes Act for the purpose of computing total income, more than 5 per cent. of that amount could be apportioned to him together with his associates (if any), or to any associate of his, or any such associates taken together.
In this subsection "associate" has the same meaning as in section 303(3) of the Taxes Act, except that for this purpose "relative" in that subsection has the same meaning as in this Chapter'.—[Mr. Robert Sheldon.]

Mr. John MacGregor: The Minister made an announcement in Committee that he would make a concession to directors of charities. Can he explain exactly how this relates to directors of charities? Am I right in thinking that all directors, not only those in charitable positions, will be brought into the net, but that where someone employed in a charity is earning more


than £5,000 a year all the fringe benefit provisions will apply to him?

Mr. Robert Sheldon: The position is that we have made a concession to the effect that a working company director not having a material interest in the company—we have defined that interest as being less than 5 per cent. of the ordinary share capital—will not fall within this legislation. This is a valuable amendment and it should be widely accepted.

Mr. Newton: I am not sure that the Financial Secretary has answered my hon. Friend's point at all. My hon. Friend asked a point which was raised in the Standing Committee and which is certainly of considerable concern to Age Concern and a number of charities, in which I have no direct interest, about how directors of charities would be treated. There was considerable concern that, simply because the word "director" was used; anybody in a charity earning more than £5,000 a year would be clobbered. All that the Financial Secretary said, and said in the statement he circulated, was that there was no intention to catch all these people. We had no clear explanation of how they would not be caught, and the hon. Gentleman has given no such explanation in response to my hon. Friend.

Mr. Robert Sheldon: I thought I had explained the position clearly, and I apologise if I did not. The situation is that where a company director has no material interest—that is, not more than 5 per cent.—he will not be affected by this provision. The same provision applies to the director of a charity, as I thought I explained clearly on an earlier occasion. Such director, who has no control over his own remuneration, will not be brought in.

Amendment agreed to.

Schedule 9

AMENDMENTS OF TAX ACTS CONSEQUENT ON PART III, CHAPTER II

Amendments made: No. 106, in page 133, line 33, at end insert—
'(1A) An employer shall not be required to include in his return information relating to a year of assessment beginning more than six years before the year of assessment in which the notice is given.'.

No. 107, in page 136, column 2, leave out lines 37 and 38 and insert—
'The place where the employees concerned (or most of them) are employed'.

No. 108, in page 137, line 11, leave out from 'where' 'to that' in line 12 and insert—
'there was in force under section 199 a notification'.

No. 109, in page 138, leave out lines 8 to 12.—[Mr. Robert Sheldon.]

Schedule 10

RELIEF FOR BUSINESS PROPERTY

Amendment made: No. 110, in page 138, line 25, leave out from '1976' to second 'the' in line 26.—[Mr. Robert Sheldon.]

Mr. Speaker: The next amendment is No. 275.

Mr. Patrick Cormack: On a point of order, Mr. Speaker. In view of the resounding vote of no confidence just returned by the electors of Thurrock, do you think that the Leader of the House could be invited to make a statement to review his preposterous announcement this afternoon?

Mr. Kinnock: Further to that point of order, Mr. Speaker. I was about to ask your guidance on whether a newly-elected Member of the House has to wait for any considerable time before taking her seat, since Dr. Oonagh McDonald, who will be a notable addition to the House for many reasons, secured a majority of 4,839 votes in the by-election at Thurrock, when there was the most enormous slip in the Tory vote and the National Front managed to secure a fair chunk of those who traditionally vote Conservative.

Mr. Fairbairn: Mr. Fairbairn rose—

Mr. Speaker: Order. I think that have been fair. We do not want Scotland as well.

Mr. Nicholas Winterton: Mr. Nicholas Winterton (Macclesfield rose—

Mr. Fairbairn: Mr. Fairbairn rose—

Mr. Speaker: Very well. I am sure that it will be out of order.

Mr. Fairbairn: Since Scotland must have a little say in these matters, may I


say that I am impressed that the hon. Member for Bedwellty (Mr. Kinnock) should use the word "slip" in these matters with regard to the Tory vote since it slipped up by about 4,000? Is that what the hon. Member means by a "slip"? Is it right that we should use words in this ambiguous way?

Mr. Speaker: We must get back to taxation.

Mr. Nicholas Winterton: On another point of order, Mr. Speaker. I regret to say that I distinctly heard a comment from the hon. Member for Birmingham, Perry Barr (Mr. Rooker) to the effect that I got 3,500 votes. He implied that I was a member of the National Front. I am not a member of the National Front. There is no foundation in the hon. Member's remark, and I hope that you will ask him to withdraw that insult.

Mr. Speaker: We have had a good interlude. I am sure no one would suggest that the hon. Member for Macclesfield (Mr. Winterton) was a member of the National Front. I would not like anyone to suggest that I was a member. Did the hon. Member for Birmingham, Perry Barr (Mr. Rooker) make that suggestion?

Mr. J. W. Rooker: Further to that point of order, Mr. Speaker. The words "National Front" have not passed my lips in this Chamber.

Mr. Speaker: We can now get back to taxation.

Mr. David Howell: I beg to move Amendment No. 275, in page 138, line 30, leave out
'as a value on which no tax is chargeable'
and insert
'after deduction of any capital gains tax payable in connection with the same transaction or any related transaction'.
As you say, Mr. Speaker, that was a nice interlude. Presumably the new lady Member will be sitting by the guillotine.
This amendment deals with the capital transfer tax, which was part of the social contract of 1974, which helped us to a 27 per cent. inflation rate. It cannot, therefore, be seen as a great triumph as a tax. It contains many anomalies and unfairnesses as well as posing a threat

to jobs. One of the most serious features of the tax, as we pointed out all along, is the interaction of capital gains tax and capital transfer tax.
When we discussed this matter in Committee of the whole House, the Chief Secretary said:
I accept that there is a serious problem as regards the combined burden in some instances when capital gains tax and capital transfer tax operate together …. Under estate duty, capital gains tax never worked in conjunction with estate duty, whereas in the case of a lifetime transfer capital gains tax and capital transfer tax work together. I want to consider the whole of that, without commitment, but I promise that I shall do that. I shall consider also the further views of the Committee when we go upstairs."—[Official Report, 17th May 1976; Vol. 911, c. 1135–38.]
We want to know what the right hon. Gentleman intends to do.

1.30 a.m.

The Minister of State, Treasury (Mr. Denzil Davies): The hon. Member for Guildford (Mr. Howell) has asked me what my right hon. Friend the Chief Secretary is doing. My right hon. Friend said that he would like to consider, without commitment, the difficulties that can arise in certain circumstances because of the interaction of capital transfer tax and capital gains tax. The Government are doing this. There are a number of difficulties, and a number of injustices could be caused by giving this kind of relief. But I can repeat, without any commitment, that we are looking at this and considering the problems that arise. I cannot say more than that, but we recognise that in some cases there could be a problem and injustice.

Mr. Graham Page: We have waited a year for all these amendments to the capital transfer tax. Are we to wait another year before clearing up this particularly difficult position, where the two taxes are interacting one on the other? We are left in grave doubt as to how for 12 months this is to operate. We cannot correct it at this stage in the Bill without the Government bringing forward an amendment. The Minister has left us in a very difficult position, having to wait another 12 months for the Finance Bill next year for further corrections to the capital transfer tax provisions inserted by the Government last year.

Amendment negatived.

Amendments made: No. 112, in page 138, line 34, after '4', insert '4A'.

No. 112A, in page 138, line 37, leave out from 'company' to 'which' in line 38.

No. 116, in page 139, line 34, leave out from 'the' to end of line 35 and insert
business of the company is to continue to be carried on after a reconstruction or amalgamation and the reconstruction or amalgamation either is the purpose of the winding-up or liquidation or takes place not later than one year after the transfer of values'.—[Mr. Denzil Davies.]

Amendment proposed: No. 117, in page 140, line 25, at end insert—
'4A.—(1) Where—

(a) the whole or part of the value transferred by a transfer of value (in this paragraph referred to as the earlier transfer) was eligible for relief under this Schedule (or would have been so eligible if such relief had been capable of being given in respect of transfers of value made at that time); and
(b) the whole or part of the property which, in relation to the earlier transfer, was relevant business property became, through the earlier transfer, the property of the person or of the spouse of the person who is the transferor in relation to a subsequent transfer of value; and
(c) that property or part, or any property directly or indirectly replacing it would (apart from paragraph 4 above) have been relevant business property in relation to the subsequent transfer of value; and
(d) either the earlier transfer was, or the subsequent transfer of value is, a transfer made on the death of the transferor;

the property which would have been relevant business property but for paragraph 4 above shall be relevant business property notwithstanding that paragraph.
(2) Where the property which, by virtue of sub-paragraph (1) above, is relevant business property replaced the property or part referred to in paragraph (c) of that sub-paragraph, relief under this Schedule shall not exceed what it would have been had the replacement or any one or more of the replacements not been made, but paragraph 4(3) above shall apply with the necessary modifications for the purposes of this sub-paragraph.
(3) Where, under the earlier transfer, the amount of the value transferred which was attributable to the property or part referred to in sub-paragraph (1)(c) above was part only of its value, a like part only of the value which (apart from this sub-paragraph) would fall to be reduced under this Schedule by virtue of thise paragraph shall be so reduce.'.—[Mr. Denzil Davies.]

Mr. Graham Page: As Amendment No. 240 has not been moved, and the Chancellor of the Exchequer's amendment

is now being moved by the Minister, will he explain it?

Mr. Denzil Davies: I am happy to give the right hon. Gentleman an explanation of the amendment. It was my intention to do so all along.
Amendment No. 117 substantially mitigates one of the conditions for the capital transfer tax business relief. Its broad effect is that, where a transferor acquired otherwise than by purchase the property being transferred, the two-year minimum period of ownership condition for the relief, in paragraph 4 of Schedule 10, may be set aside.
In more detail, business relief will be available on a transfer of business property where the transferor has not owned the property being transferred for two years before the transfer, provided that he or his spouse acquired the property on a transfer in respect of which business relief was due, and that either the earlier transfer or the transfer in question took place on death. It follows an undertaking given by my right hon. Friend the Chief Secretary in Committee.

Amendment agreed to.

Amendments made: No. 118, in page 141, line 29, at end insert:
'but in a case where paragraph 4A above applies this condition shall be treated as satisfied if the assets (or it and the asset or asets replaced by it) was or were so used throughout the period between the earlier and the subsequent transfer mentioned in that paragraph (or throughout the part of that period during which it or they were owned by the transferor or the transferor's spouse)'.

No. 119, in page 142, line 14, after 'property', insert:
'or would be so reduced but for paragraph 1(2A) thereof'.

No. 120, in page 142, line 15, after 'is', insert 'or would be so'.—[Mr. Denzil Davies.]

Amendment proposed: No. 121, in page 142, line 27, leave out from beginning to end of line 32.—[Mr. Denzil Davies.]

Mr. Graham Page: The amendment leaves out a paragraph headed "Claims for relief". May I ask the Minister to confirm that if that paragraph is left out no claim will then be necessary and that the relief will be given without the taxpayer having to claim benefit?

Mr. Denzil Davies: That amendment is consequential on Amendment No. 110, which was the main amendment giving effect to what the right hon. Gentleman has just said.

Amendment agreed to.

Clause 69

RELIEF FOR AGRICULTURAL PROPERTY

Amendment made: No. 122, in page 49, line 9, leave out from beginning to 'Schedule' in line l0.—[Mr. Denzil Davies.]

Amendment proposed: No. 123, in page 49, line 15, at end insert—

'(2A) In sub-paragraph (2) of paragraph 1, after the words "transfer of value" in paragraph (a) there shall be inserted the words "and either that transfer or the current transfer was or would have been a transfer made on death" and at the end of paragraph (d) there shall be added the words "and
(e) the agricultural property became, through the earlier transfer, the property of the person or of the spouse of the person who is the transferor in relation to the current transfer.
(2A) Where, by virtue of sub-paragraph (2) above, the conditions stated in paragraph 3 below are deemed to be satisfied but, under the earlier transfer mentioned in that sub-paragraph, the amount of the value transferred which was attributable to the agricultural property was part only of the value of that property, a like part of its agricultural value shall be substituted for the agricultural value of the property in ascertaining the part eligible for relief under paragraph 2 below"'.—[Mr. Denzil Davies.]

Mr. David Howell: Will the Minister expand on this quite lengthy amendment?

Mr. Denzil Davies: Amendment No. 123 is the main amendment in this group starting with Amendment No. 119, which was consequential. These amendments introduce into the conditions for the capital transfer tax agricultural relief a provision comparable to that being proposed for business relief by Amendment No. 117.
Under the Finance Act 1975, agricultural relief can be claimed on the transfer of agricultural land and buildings by a full-time working farmer who, inter alia, has occupied the property transferred for at least two years before the transfer. These conditions may be set aside if within two years of the transfer in question there had been an earlier transfer of the same property which had

been, or would have been, eligible for agricultural relief. This provision is a corollary of the business relief set out in an earlier amendment.

Amendment agreed to.

Amendment made: No. 125, in page 49, line 35, at end insert:
'(6) The preceding provisions of this section shall have effect as follows:—

(a) subsections (1), (2) and (3) to (5), in relation to chargeable transfers made after 6th April 1976; and
(b) subsection (2A) in relation to chargeable transfers made after the passing of this Act'.—[Mr. Denzil Davies.]

Clause 70

CONDITIONALLY EXEMPT TRANSFERS

Mr. Robert Cooke: I beg to move Amendment No. 225, in page 49, line 41, after 'made', insert:
'(before or after such transfer)'.

Mr. Speaker: With this we are taking the similar amendment, No. 226, in page 50, line 1.

Mr. Cooke: This amendment is non-controversial and has support from both sides of the House. It is aimed at letting the owner of heritage property know in advance of a transfer whether his property would qualify for conditional exemption.
In Committee the Chief Secretary undertook to write to my hon. Friend the Member for Blaby (Mr. Lawson), who tabled this amendment. We were not entirely satisfied with the Minister's reply at that time but there was not then proper opportunity to explore the matter. The Chief Secretary said in his letter to my hon. Friend that he was not yet in a position to accept our proposition. That suggests that the Government were thinking about it.
It would be a great help to the owners of heritage property if they could have some assurance in advance that buildings, works of art or nature reserves would qualify for conditional exemption at the time of transfer. Nature reserve interests are particularly concerned about this matter. If the owners knew that the reserves would qualify provided that they were kept in a reasonable state, they would be more likely to continue as reserves. But we need some clarity in this situation.
I challenge the remarks of the Chief Secretary in Committee about the present system. He said that it had worked for a long time to the total satisfaction of heritage bodies. I have been informed from a number of quarters that this is far from the case.

Mr. Farr: I support what my hon. Friend the Member for Bristol, West (Mr. Cooke) said. It is essential to landowners and others who possess sites of special or outstanding scientific interest that they should know before the transfer takes place whether these exemptions will be permitted. They should know exactly what is the position before the transfer is undertaken, as that may have an important effect upon, for instance, the management procedure of a site of special scientific interest.
There is undoubted evidence that sites which are of value to the nation, and which should be preserved for scientific and other special reasons, may be lost unless adequate notification is given, before the transfer takes place, that the relevant sites will qualify for this exemption. It is important that Parliament should make that clear tonight.
The Government have been helpful over this matter. The Minister sympathetically answered questions which I asked on 7th June. He gave another sympathetic answer to a question which I asked on the same subject on 9th June. I have had correspondence with the Secretary of State for the Environment. From the information I have received from him, I know that he is concerned about the preservation of these valuable sites. On this occasion, will the Minister be clear and forthcoming so that there may be no doubt about the future position?

Mr. Robert Sheldon: The amendment moved by the hon. Member for Bristol, West (Mr. Cooke) was ingenious. We knew about it in Committee although we did not have the opportunity of debating it. It seeks to obtain the right to claim exemption in advance of the transfer. I understand the interest of the hon. Member for Blaby (Mr. Lawson). He is concerned about sites of special scientific interest. We understand the reasoning behind this proposal, which is aimed at the proper preservation and management of these sites.
A difficulty arises when we try to look at the problems involved in seeking the clearance arrangements so that those concerned may seek to establish the nature of the site in advance of the transfer. A considerable period of time may elapse between the time when we look at the nature of the site and make an assessment of its position, and the transfer. During that time the nature of the site and other matters might materially alter. This kind of promised exemptioin would not be applicable at the time of the eventual transfer.
I understand the interest of those Members of the Opposition who are using the amendment to express their interest in the preservation of sites. However, I am not wholly convinced that the use of financial procedures is the best way in which to undertake the preservation of such sites.
The amendment affords the Opposition an opportunity to discuss this matter and to extend the range of people who may become interested in it. However, I do not think that the provisions which apply to estate duty may be easily overridden. Although I am obviously prepared to look at this matter from time to time, I do not think that the case has been wholly made out at present.

Mr. David Howell: I do not think that that was either an elevating or a devastating answer. The Minister thought that there was a case. He said that he would look at it, but not now. I am not familiar with specific cases as are my hon. Friend the Member for Bristol, West (Mr. Cooke) and my hon. Friend the Member for Blaby (Mr. Lawson), but I have no doubt that there is a potential threat to areas of great scientific and natural importance.
1.45 a.m.
It would be a pity if, as a result of the delay which arises from the Financial Secretary's postponement of consideration of this matter, the full rigours of capital transfer tax applied and the property were dispersed, ploughed up, if it had some particular qualities connected with a nature reserve, filled in, built upon, or developed and the whole thing was lost for good. That would be very sad.
My hon. Friends will expect more from the hon. Gentleman in the way of an assurance that he will do something about


this matter, and not merely that he will look at it in due course.

Mr. Robert Cooke: I think that rather than have the House negative the amendment, which is a somewhat unsatisfactory situation, I should ask leave to withdraw it, but only with misgivings and in the hope that the Government will take the matter seriously. We have had a poor reply by the Minister. It was rather like a kind of nature reserve—a bog with mist rising up from it. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 126, in page 50, line 12, leave out 'ten' and insert 'six'.

No. 127, in page 50, line 31, leave out '75' and insert '78'.—[Mr. Robert Sheldon.]

Schedule 11

WORKS OF ART, HISTORIC BUILDINGS ETC.: CONSEQUENTIAL AMENDMENTS

Amendment made: No. 128, in page 145, line 25, leave out 'section 70' and insert 'sections 70 and 78'.—[Mr. Robert Sheldon.]

Clause 72

CHARGEABLE EVENTS

Amendment made: No. 129, in page 52, line 19, at end insert
'(or, in the case of settled property, the trustees or the person next entitled) within three years of the death'.—[Mr. Robert Sheldon.]

Clause 73

AMOUNT OF CHARGE UNDER SECTION 72

Amendments made: No. 130, in page 53, line 26, after 'amount', insert
'under the appropriate Table in that section'.

No. 131, in page 53, line 28, at end insert—
'(2) For the purposes of subsection (1)(b)(ii) above the appropriate Table is, if the conditionally exempt transfer by the relevant transferor was made on death, the first Table and, if not, the second'.

No. 132, in page 54, line 14, at end insert—
'or before any event which apart from section 72(4) above would have been such a chargeable event.'—[Mr. Robert Sheldon.]

Clause 74

REINSTATEMENT OF TRANSFEROR'S CUMULATIVE TOTAL

Amendments made: No. 218, in page 54, line 44, leave out subsection (3) and insert—
'(3) If—

(a) the person who made the last conditionally exempt transfer of the property before the relevant event is not the relevant transferor in relation to that event; and
(b) at the time of that event or within the previous five years the property is or has been comprised in a settlement made not more than thirty years before that event; and
(c) a person who is the settlor in relation to the settlement has made a conditionally exempt transfer of the property within those thirty years,

subsections (1) and (2) above shall have effect with the substitution for references to the person who made the last conditionally exempt transfer before the relevant event of a reference to any such person as is mentioned in paragraph (c) above.'

No. 219, in page 55, line 7, after '(3)', insert '(c)'.

No. 133, in page 55, line 9, at end insert—
'or before any event which apart from section 72(4) above would have been such a chargeable event.'—[Mr. Robert Sheldon.]

Clause 75

CONDITIONALLY EXEMPT DISTRIBUTIONS

Amendment made: No. 134, in page 55, line 16, leave out 'ten' and insert 'six'.—[Mr. Robert Sheldon.]

Clause 76

EXEMPTION FROM PERIODIC CHARGE

Amendments made: No. 135, in page 56, line 47, at end insert—
'(1A) Where property is comprised in a settlement and there has been, on or before the occasion on which it became comprised in the settlement, a disposal of the property in relation to which subsection (4) of section 31 of the Finance Act 1965 (capital gains tax relief for works of art etc.) had effect, the said paragraph 12 shall not have effect in relation to the property on any relevant date falling before the first occurrence after the disposal of an event on the happening of which the property is treated as sold under subsection (5) of that section'.

No. 136, in page 57, line 2, leave out
'conditionally exempt transfer of the property'


and insert
'such transfer or disposal of the property as is mentioned in subsection (1) or (1A) above'.

No. 137, in page 57, line 5, leave out paragraph (a).

No. 138, in page 57, line 15, leave out 'that' and insert 'a relevant'.—[Mr. Robert Sheldon.]

Clause 77

TRANSFERS ON OR BEFORE 6TH APRIL 1976

Amendment made: No. 139, in page 58, line 30, leave out subsection (4) and insert—
'(4) In sections 73(6) and 76 above references to a conditionally exempt transfer of any property include references to a transfer of value in relation to which the value of any property has been left out of account under the provisions of the said sections 31 to 34 and, in relation to such property, references to a chargeable event or to the tax chargeable in accordance with section 73 above by reference to a chargeable event include references to an event on the occurrence of which tax becomes chargeable under those provisions or to the tax so chargeable.'.—[Mr. Robert Sheldon.]

Clause 78

MAINTENANCE FUNDS FOR HISTORIC BUILDINGS

Mr. Cormack: I beg to move Amendment No. 142, in page 59, line 22, leave out 'and (b)' and insert—
'or
(b) the value transferred by it is attributable to income property which arises from, or is comprised in, supporting property designated under subsection (1D) below which becomes comprised in a settlement; and
(c)'.
I do so on behalf of my hon. Friend the Member for Bristol, West (Mr. Cooke).

Mr. Speaker: With this, we are taking the following Amendments:
No. 268, in page 59, line 26, leave out
'by virtue of a transfer of value exempt under this section'
and insert
'in respect of which the Treasury gives such a direction'.
No. 144, in page 59, line 27, at end insert—
'(1A) Property appropriate in character and amount designated under subsection (1D) below may be set aside for the support of

property qualifying under this section provided that it is held under the requisite undertaking under subsection (1B) below and such property is referred to in this section as "supporting property".
(1B) The requisite undertaking to be given with respect to supporting property by such person as the Treasury think appropriate in the circumstances of the case is that, until the person beneficially entitled to the supporting property dies or designation is withdrawn, reasonable steps shall be taken to manage it for the benefit of the qualifying property it is to support in accordance with and as may be directed under regulations made under subsection (1C) below.
(1C) The Treasury may by regulations make provision generally with regard to the implementation of undertakings given under subsection (1B) above and such regulations may include provision for—

(a) the management of the supporting property;
(b) the keeping of appropriate records as to the ownership and nature of supporting property, accounts appertaining thereto and the rendering of returns thereon;
(c) the withdrawal of designation on supporting property whether by the owner or by direction of the Treasury after the giving of notice for such periods as may be prescribed;
(d) the transfer of all income arising from the supporting property into a settlement such as is referred to in this section;
(e) the transfer of capital comprised in the supporting property into the said settlement at the owner's discretion:
(f) the application of such sums as may be transferred to the owner or manager of the supporting property from the said settlement in the manner that the trustees may direct for the purpose of protecting or enhancing the qualifying property or increasing the value of any benefit arising from the supporting property for the qualifying property.
(1D) The Treasury may, on a claim made at any time under this section, designate supporting property with respect to qualifying property which, in its opinion, it is desirable to support with the income or capital derived from the supporting property.
(1E) Designated supporting property shall be treated as though it were designated under sections 70–77 above and—

(a) lifetime transfers of supporting property made with the consent of the Treasury and transfers of it under section 22 of the Finance Act 1975 shall be conditionally exempt transfers; and
(b) distribution payments and capital distributions of supporting property shall be conditionally exempt distributions; and
(c) a chargeable event arising in relation to the whole of the qualifying property shall be treated as being a chargeable


event with respect to the supporting property and have the effect of withdrawing designation therefrom; and
(d) sections 70–77 shall have effect as though they included references to designated property.
(1F) Property already comprised in or transferred into a settlement may be designated as supporting property.'.

No. 269, in page 59, line 39, leave out '(a)'.

No. 270, in page 60, leave out lines 11 to 13 and insert
'if trustees set aside a separate fund for the purposes of this section and give to the Treasury a written undertaking that they will not during the continuance of the settlement apply any capital or income of that fund otherwise than as aforesaid, then so long as that undertaking is observed the fund shall be treated as comprised in a separate settlement and that settlement shall be treated as complying with the requirements of subsection (2)(a) above (whether or not they would me so treated but for this provision).
(3A) On the termination of a settlement in respect of which the Treasury has given a direction under this section, tax shall be charged in the manner provided in sub-paragraphs (5) to (9) of Paragraph 17 of Schedule 5 to the Finance Act 1975 unless and except so far as—

(a) the property comprised in the settlement devolves on such a body or charity as is mentioned in subsection (3)(ii) above or
(b) the property so comprised becomes (on or within six months after the termination of the settlement) comprised in a new settlement in respect of which the Treasury gives a direction under this section.'

I understand that the hon. Member for Bristol, West (Mr. Cooke) feels that it would be right to discuss also the following amendments:

No. 147, in page 60, line 10, leave out from 'below' to end of line 13.

No. 246, in page 60, line 10, leave out 'and' and insert
'or

(iii) as respects capital not so applied, for the benefit of the settlor subject to subsection (3A) below; or
(iv) as respects capital not so applied, for the benefit of the beneficiaries of the settlement subject to subsections (3A) and (3B) below; and'.

No. 247, in page 60, line 12, leave out 'property' and insert 'income'.

No. 248, in page 60, line 13. at end insert—

'(c) that on the termination of the settlement the capital comprised in it may be applied for the benefit of—

(i) the settlor, subject to subsection (3A) below; or
(ii) other beneficiaries of the settlement, subject to subsections (3A) and (3B) below;
and none of the remaining capital can devolve otherwise than on such a body or charity as aforesaid.

(3A) None of the capital comprised in a settlement by virtue of a transfer on which a direction has been made under subsection (1) above may be made the subject of an exempt capital distribution made under subsection (3)(a)(iii) or (c)(i) above until after the expiry of seven years from the date of the transfer into the settlement.

(3B) where a capital distribution is made under subsection (3)(a)(iv) or (c)(ii) above, that distribution shall not be treated as exempt under this section with the effect that the provisions of sections 73 to 75 above shall apply'.

Mr. Robert Cooke: Yes, Mr. Speaker. They are all related to the same clause and point.

Mr. Cormack: Thank you. Mr. Speaker, for enabling us to clarify that. My hon. Friend the Member for Bristol, West has asked me to move this amendment, which I gladly do. I think that it would be helpful if I had the Minister's attention, because I am not seeking to move the amendment in any spirit of hostility.
The Financial Secretary will probably agree that there is an almost unanimous desire in both the House and the country that the proper importance of heritage properties should be recognised. The Minister will probably also accept that there is a large measure of all-party agreement that our heritage properties. particularly our historic houses, can best be economically maintained and safeguarded by their owners. I think that that is why the Government themselves have included Clause 78. We welcome that and we thank them for it.
I think it is understood that the Government felt that the clause should be tightly drawn, but we are seeking to point out that it has been so tightly drawn that very few owners of heritage properties, and the few with the most spectacular properties to display, will contemplate taking advantage of the facilities offered within the clause. We cannot believe


that that was the Government's intention. All that our amendments seek to do, although they are probably imperfectly drafted, is to widen the coverage in order to enable similar advantages to be enjoyed by all house sof intrinsic importance and interest.
We are asking the Government to receive these amendments in the spirit in which I am seeking to discuss them. The amendments have a large measure of all-party support within the House, in the form of the all-party Heritage Group, and they also have a tremendous amount of support outside the House. All the important national amenity and heritage societies support the principle and philosophy behind these amendments. That is particularly the case with the most important of all those bodies, the National Trust. I hope that the Minister will take this point particularly to heart. I am quite certain that everybody who recognises the importance of the heritage and of the preservation of our most important buildings will wish to do something to extend the scope of Clause 78.
I remind the Minister of the enormous dollar and foreign currency earning potential of our heritage properties. Tourism already ranks very high in our list of industries, and one of the principal magnets for tourists is the corpus of heritage properties in this country. I know that the Minister and the Government recognise this, and I hope it will be the wish of the Government to do everything possible to ensure the survival of these properties in the best possible form.
Coming, as this does, closely on European Architectural Heritage Year and preceding, as it does, Education Heritage Year, which will come next year, I hope that the Minister will listen with particular sympathy to what we are seeking to say tonight, not in any hostile spirit, but in a helpful way.
If the hon. Gentleman feels that he cannot accept these amendments tonight, I hope that at least he will give a promise that he is prepared to meet hon. Members who are particularly concerned about this matter. I hope he will allow us to bring representatives of the amenity and heritage societies to discuss the issue with him, so that on a future occasion, and in the next Finance Bill,

the scope of the clause can be extended along the lines we are suggesting tonight.
I do not want to detain the House further at this very late hour, but this is a subject of particular importance and it is one which is close to the hearts of many hon. Members. Although the Government have shown some sympathy, and we appreciate it, we feel that the clause is so tightly drawn that, unless amendments along these lines are made, the Government's intentions will be frustrated by their own draftsmen's endeavours.

Mr. Farr: I endorse and support what has been said by my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack). I have no interest to declare in this matter—I am not even a member of the Heritage Group in the House—but I know from my experience how great is the value of our heritage of ancient and historic buildings. However, I do not wish to appeal to the House purely from that angle. I shall stress the great importance of our ancient buildings to tourism. My authority for that statement is the present Chairman of the English Tourist Board, Sir Mark Henig, who may be known to hon. Members on the Government side. He has a fine record in local government and has been an excellent Chairman of the English Tourist Board for many years.
Sir Mark Henig has stressed on more than one occasion the vital importance of maintaining the unparalleled collection of ancient buildings and homes which we have in Britain. He does not wish to see them preserved simply as stately homes. He has found from the reports he receives from visitors and tourists that the stately home is most effective when it is preserved in its original setting so far as possible, perhaps with an attached village or farm or some land around it, so that something of its ancient splendour and setting is preserved.
Since he has to deal with money, the Minister has to be a practical man. I put it to him that it is a good bargain to do the best we can to preserve our wonderful heritage, not only because it is a splendid national heritage enjoyed by many millions of people but also because it represents good business in


encouraging tourists to come to Britain, where they can see a selection of homes and stately buildings unequalled anywhere else in the world.
I urge the Minister, therefore, to do his best to help us as much as he can, not only because he will be helping to keep and maintain the wonderful heritage which we possess but also because he will thereby help to swell our coffers with much-needed money from tourists who come to Britain.
Only yesterday, I think, the figures were announced showing that tourism to Britain this year is running at the highest level ever. But tourists will not come here unless they have something to see, and Sir Mark Henig has frequently emphasised—he must know from his vast experience—that what the tourist wants to see first and most often, wherever he is in the country, is our ancient stately homes and buildings, well preserved in their natural setting.

Mr. Robert Sheldon: I entirely support all that has been said about the need to preserve our heritage. We are fortunate in having available to us in constant display the fine buildings we possess throughout the country. We take great pride in them, and we must do all we can to preserve them. I entirely endorse what the hon. Member for Harborough (Mr. Farr) said about our unequalled possessions.
The comments of the hon. Member for Harborough and of his hon. Friend the Member for Staffordshire, South-West (Mr. Cannock), as well as those put to me by a number of my hon. Friends, expressed the reasons which led us to try to see how we might provide arrangements to assist the preservation of these buildings, but obviously there are problems. If we were not to get it right, there would be opportunity here not so much to held preserve the buildings and houses in which we have such a special interest but to help individuals who might take advantage of loose arrangements and lax legislation. It has, therefore, been necessary—I am sure that this is common ground—to try to get the legislation right first time so that we could have the advantages of the one without the disadvantages of the other.
The amendments deal with maintenance funds and would provide for new schemes

for maintenance funds, the main intention of such schemes being to enable sums to be set aside for maintenance and to have relief from capital transfer tax. At the same time, the withdrawal of funds in certain eventualities would be allowed. I understand the arguments that can be made in support of the proposition, but that is our problem.
2.0 a.m.
We set out to provide arrangements which such schemes were irrecoverable, which would mean that money was clearly set aside for those purposes, and under which tax arrangements could be made. But we are dealing with complex matters. Although we have at heart the points which have been made, it would be difficult to ensure, if we relaxed the arrangements, that the person who provided the money would be able to get possession of those funds and enjoy the considerable tax advantage that the funds receive while in the maintenance fund.
A number of the amendments deal with this issue in one way or another. One of them allows the settlor to take the capital out of the maintenance fund after three years and allows the beneficiaries to take money out subject to capital transfer tax. But even that does not take into consideration all the advantages during the long period which could be involved. The multiplying effect of inflation must be taken into account. The advantage of not having to pay tax during those years is enhanced by the increase in value caused by inflation. There could, therefore, be the double advantage of freedom from tax and freedom from increases in taxation arising from inflation over a long period of time.
I do not say that in a discouraging spirit to the idea behind the proposal, but I want to show that the difficulties are compounded by the complexity of the legislation and the various ways in which avoidance can be indulged. It is difficult to set in train the full assessment of where it might lead. The amount of tax that is charged on an eventual sale could be less than the full amount enjoyed by the owner while the property remained in the fund.
Those are the problems, but we have demonstrated our belief in the general principle of trying to assist by keeping as open a mind as possible about the


way in which we can provide assistance. We shall continue that attitude.

Mr. Cormack: I accept the sincerity of the Minister in what he is trying to say, but does he accept that bodies such as the National Trust, the Society for the Protection of Ancient Buildings, the Georgian Group and the Victorian Society do not want to assist people to evade their fiscal responsibilities? They are worried that the clause does not go far enough because it excludes some worthy cases and individuals. Will the Minister keep the matter under review, if only because of the prompting of those organisations?

Mr. Sheldon: I am always glad to keep any aspect of the tax system under review. Even if we met all the requirements of hon. Members, there would still be problems over the national heritage. I am prepared to look at all angles from time to time.
As for the National Trust, Amendment No. 147 deals with the problem that I see of the return to the settlor or his family, perhaps after 80 years, of some part of the funds. This comes into the category of the problems I discussed earlier.

Mr. Robert Cooke: I thank the Minister for what he has said, as far as it went. As he will realise, it did not go all that far. The hon. Gentleman approached the whole subject somewhat apprehensively. We all do, and we all sympathise with him.
At 2 o'clock in the morning I do not propose to try to answer in detail all the points that the hon. Gentleman put. Our amendments were designed, if not as talking points at such a late hour, as thinking points for the Government and ourselves. This is a continuing process.
I share the view expressed by all the national amenity societies and other bodies which have given time to the subject that the Government's effort so far will not produce the results we all seek, simply because they have drawn the provision so tightly that very few people, and therefore very few heritage bodies, are likely to benefit from it.
Not all magnificent properties belong to rich people. But there are still some people to whom it might be attractive to say goodbye for ever to a large slice

of an estate or money, in exchange for the capital transfer tax relief and capital gains tax relief that the Government are giving if people put the money into the kind of settlement outlined in Clause 78. But the Government will realise that there are no income tax advantages—indeed, there are considerable disadvantages—when the money is in the fund.
The Minister wrote me a rather confusing letter in which he made clear that in certain circumstances if a fund was accumulated—and the Government specifically talk about accumulations—the money could be taxed at 98 per cent. in the year in which it was spent. It is not a very attractive maintenance fund proposal if one must say goodbye to control of the capital and then be in a situation unlike that of a charity. Some educational charities were set up to help support a particular property, and there all the income was tax-free and could be spent on the property.
In the view of many experts, the Government have not got the position with regard to the income from the funds right. The Minister's letter seemed to confirm that. There will be precious little income coming out of the funds into the heritage property.
I should like to make one aside about the hon. Gentleman's words about tax avoidance. We do not want to set up anything that could be used as a gross abuse, enabling taxpayers to avoid paying tax and divert to their personal purposes money that should be paid in tax. But it would be different if the system eventually settled upon resulted in people being able to spend large sums on the heritage property and not their personal enjoyment, even if there was excessive expenditure. One can envisage an estate where all the decayed trees were replanted and all the fences made good, and where there were great improvements to the landscape. The public would be getting a good deal.
We cannot pursue this matter endlessly tonight, but I believe that we have all benefited from the series of debates on the financial problems of the national heritage. The Government have acknowledged that grave problems exist, and they do not claim yet to have found the answers. We look forward to working with them in the months ahead. We seek


to preserve and enhance an ever more accessible living and lively heritage of landscape, buildings and works of art. We intend to halt the decay, destruction and dispersal caused by the threat of capital taxation. The uniquely British relationship between private owners and public institutions must not be destroyed. We aim to restore confidence and provide a settled future for the heritage.

Mr. David Howell: I think we all appreciate both the good intentions behind Clause 78 and the difficulties that the Financial Secretary seeks to overcome as he weaves his way through all the rival pressures upon him in trying to meet the needs of the overall situation. However, as we come to the end of the debates on this aspect of capital transfer tax, this part of the Bill and the whole of the Bill, it would be wrong not to say that, despite the efforts of the Government and despite the new clause, there is today a deep sense of foreboding among those struggling to maintain and keep open to the public the great historic houses and parks of the kingdom.
It would be entirely illusory to imagine that the Government have now done all that is necessary to ensure that the fabric of these houses does not crumble and that the parks remain well maintained for the years ahead. On the contrary, the threat is there and growing all the time. It obviously grows the faster in a country where prosperity is not growing and where the burden of taxation is increasing. These factors are part of the millstones that grind down upon the heritage. They are growing problems.
This is not merely a matter of watching the situation to see how it goes. We must try to seek ways of protecting our historic houses from the growing threats that face them within the limits of public policy, and while this Government are in power, within present priorities and prejudices in fiscal taxation. Whether that should be done by amendments to the clause, making it a little less tightly drawn, despite all the problems of not wanting to create any loopholes, which we all understand, or whether it should be done by considering the treatment of income tax that is available to the historic houses which are kept open to the public, which are fully accessible to the public

and which have to be run in the sense of major businesses, with sometimes tens of thousands of people visiting them as major tourist attractions, I do not know, but in one way or another we must ensure that more is done.
It is not enough to say that the clause will keep things all right for the time being and that a watch will be kept to see how matters develop. The situation is more urgent and worrying than that. I think that hon. Members on both sides of the House and from all parts of the political spectrum who treasure our great houses, parks and other aspects of the heritage must continue to think constructively and positively if we are to preserve what we value.

2.15 a.m.

Mr. Cormack: With the leave of the House, may I say that it is obvious that the Minister shares our interest and concern in these matters. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 79

MUTUAL TRANSFERS: EXEMPTION FOR DONEE'S GIFT

Mr. Denzil Davies: I beg to move Amendment No. 154, in page 62, line 6, leave out from 'tax' to end of line 10 and insert—
'(4) Subsection (1)(b) above has effect in relation to a person as the donor's spouse, widow or widower only if at the relevant time both the donor and that person were, or neither of them was, domiciled in the United Kingdom; and for that purpose the relevant time is, in the case of a spouse, the time of the donee's transfer and, in the case of a widow or widower, the time of the donor's death.
(5) Where the donor has died before 1st April 1975 subsection (1)(b)(ii) above shall have effect with the substitution for the reference to his death of a reference to that date.'.
This amendment extends the capital transfer tax gift-back relief to the case where the donee returns the original donor's gift to the donor's non-domiciled spouse at a time when the original donor himself was also not domiciled in the United Kingdom. It also extends the relief to gifts back to the original donor's widow or widower if the original donor and the widow-widower were not domiciled in the United Kingdom at the time of the original donor's


death. This fulfils an undertaking given to the right hon. Member for Crosby (Mr. Page) in Committee.

Mr. Graham Page: I am grateful to the Minister. I take it that this is a redrafting of the part left out and that there is no substantive alteration.

Mr. Denzil Davies: indicated assent.

Mr. Graham Page: I see that the Minister agrees that that is the case. I do not want to delay the House, but I should like to thank the Minister for his courtesy in introducing amendments to meet the points made by me in Committee.

Amendment agreed to.

Clause 80

MUTUAL TRANSFERS: RELIEF FOR DONOR'S GIFT

Amendment made: No. 155, in page 63, line 22, leave out
'the expiration of six months after'.—[Mr. Denzil Davies.]

Clause 81

VOIDABLE TRANSFERS

Amendment made: No. 156, in page 64, line 13, leave out
'the expiration of six months after.'.—[Mr. Denzil Davies.]

Clause 83

DISPOSITIONS ON TRUST FOR BENEFIT OF EMPLOYEES

Amendments made: No. 157, in page 65, line 33, leave out
'who is a member of'
and insert
'beneficially entitled to shares in'.

No. 158, in page 65, line 36, leave out from 'all' to end of line 39 and insert
'the shares and securities of the company to which he is beneficially entitled; and
(b) immediately after the disposition there are no shares or securities of the company to which his spouse is beneficially entitled; and'.

No. 159, in page 66, line 16, leave out 'or has been'.

No. 160, in page 66, line 9, leave out 'or has been'.—[Mr. Denzil Davies.]

Amendment proposed: No. 161, in page 66, line 24, leave out paragraph (c) and insert—

'(c) any other person who has been a participator in any such company as is mentioned in paragraph (a) or (b) above at any time after, or during the ten years before, the disposition made by that company or, as the case may be, the disposition of its shares; or
(d) any person who is connected with any person within paragraph (a), (b) or (c) above.'.—[Mr. Denzil Davies.]

Mr. Graham Page: I think that this amendment is self-explanatory, but I believe that the period of 10 years is too lengthy. I know that I must not look a gift horse in the mouth, since the Minister has sought to carry out an assurance given to me in Committee. Therefore, I hope that, as these cases arise, we shall be able perhaps in a later Finance Bill to cut down the 10-year period.

Amendment agreed to.

Clause 84

WAIVER OF REMUNERATION

Amendment made: No. 220, in page 67, line 7, leave out from '(1)' to end of line 19 and insert
'Subject to subsection (2) below, the waiver or repayment of an amount of remuneration shall not be a transfer of value if, apart from the waiver or repayment, that amount would be assessable to income tax under Schedule E.
(2) Where, apart from the waiver or repayment, the amount of the remuneration would be allowable as a deduction in computing for the purposes of income tax or corporation tax the profits or gains or losses of the person by whom it is payable or paid, this section applies only if, by reason of the waiver or repayment, it is not so allowed or is otherwise brought into charge in computing those profits or gains or losses.'—[Mr. Denzil Davies.]

Clause 89

EXEMPT TRANSFERS: MODIFICATION OF SUPPLEMENTARY PROVISIONS

Amendments made: No. 209, in page 69, line 3, leave out 'following amendments' and insert
'amendments set out in subsections (2) to (6) below.'.

No. 210, in page 70, line 32, at end insert—
'(7) After paragraph 22 of Schedule 6 to the Finance Act 1975 there shall be inserted the following paragraph—

"Legal rights in Scotland

22A.—(1) Where on the death of a person legal rights are claimed by a person entitled to claim such rights, those rights shall be treated as a specific gift which bears its own tax.

(2) In determining the value of legal rights mentioned in sub-paragraph (1) above, any capital transfer tax payable on the estate of the deceased shall be left out of account.

(3) In the case of any death occurring after 13th March 1975 and before the passing of the Finance Act 1976, the executors of the deceased may elect that this paragraph shall apply to the estate of the deceased.

(4) This paragraph extends to Scotland only".'.—[Mr. Denzil Davies.]

Schedule 12

TRANSFERS WITHIN THREE YEARS BEFORE DEATH

Amendment made: No. 164, in page 147, line 36, leave out 'sub-paragraph (3)' and insert
'sub-paragraphs (2A) and (3)'.—[Mr. Denzil Davies.]

Mr. Denzil Davies: I beg to move Amendment No. 165, in page 147, line 43, at end insert—
'(2A) Where the relevant transaction is the making by the company of a transfer of value by which the value of the estate of the person who made the chargeable transfer or, if his spouse is domiciled in the United Kingdom, his spouse is increased by any amount, the increase provided for by sub-paragraph (2) above shall be reduced by that amount'.
This amendment makes a minor change to one of the detailed rules governing the relief for transfers within three years before death. It fulfils a commitment given to the right hon. Member for Crosby (Mr. Page) in Committee. In substance, it incorporates Amendment No. 704, which the right hon. Gentleman moved in Committee.

Amendment agreed to.

Clause 94

FALLS IN VALUE OF LAND AFTER DEATH

Amendment made: No. 166, in page 73, line 18, leave out 'two' and insert 'three'.—[Mr. Denzil Davies.]

Schedule 13

FALLS IN VALUE OF LAND AFTER DEATH [PROVISIONS ADDED TO SCHEDULE 10 TO FINANCE ACT 1975]

Amendments made: No. 167, in page 150, line 9, leave out 'two' and insert 'three'.

No. 168, in page 150, line 43, leave out 'two' and insert 'three'.

No. 169, in page 153, line 12, leave out 'two' and insert 'three'.—[Mr. Denzil Davies.]

Mr. Denzil Davies: I beg to move Amendment No. 170, in page 154, line 19, at end insert—

'Compulsory acquisition more than three years after death

37A.—(1) If after the end of the period of three years immediately following the date of the death an interest in land is acquired from the appropriate person in pursuance of a notice to treat served before the death or within that period by an authority possessing powers of compulsory acquisition, then, subject to the following sub-paragraphs, this Part of this Schedule shall apply in relation to the interest as it applies in relation to interests sold within that period.

(2) Sub-paragraph (1) above shall not have effect in relation to an interest if its sale value would exceed its value on death.

(3) In determining the period referred to in paragraph 37(1) above, no account shall be taken of the sale of an interest in relation to which sub-paragraph (1) above has effect; and if the claim relates only to such interests, paragraph 37 shall not apply in relation to the claim.'.

Mr. Deputy Speaker (Sir Myer Galpern): With this amendment we may also take Government Amendment No. 171.

Mr. Davies: The amendments extend the relief available for falls in value of land where land is sold to an authority possessing compulsory purchase powers and a notice to treat was issued either before death or within three years after death. I said in Committee that we would see whether an amendment could be put down to deal with cases arising from compulsory purchase cases.

Amendment agreed to.

Amendment made: No. 171, in page 154, line 36, leave out from 'is' to 'powers' in line 37 and insert
'acquired from the appropriate person in pursuance of a notice to treat served by an authority possessing'.—[Mr. Denzil Davies.]

Clause 96

RELATED PROPERTY: PROPERTY GIVEN TO CHARITIES, ETC.

Amendment made: No. 172, in page 74, line 38, after 'has', insert
'within the preceding five years'.—[Mr. Denzil Davies.]

Clause 99

ACCUMULATION AND MAINTENANCE SETTLEMENTS

Amendments made: No. 173, in page 76, line 25, after 'were', insert 'either'.

No. 174, in page 76, line 26, at end add
'or children, widows or widowers of such grandchildren who were themselves beneficiaries but died before the time when, had they survived, they would have become entitled as mentioned in paragraph (a) above'.

No. 175, in page 76, line 41, leave out from '1976' to 'or' in line 44 and insert
'or the beneficiaries on 1st April 1977 include a living beneficiary'.—[Mr. Denzil Davies.]

Clause 103

SETTLOR'S WIDOW

Mr. Denzil Davies: I beg to move Amendment No. 176, in page 79, line 13, after 'deceased', insert
'or the deceased died before 1st April 1977'.

Mr. Deputy Speaker: With this amendment we may also take Government Amendments Nos. 177 and 178.

Mr. Davies: The amendments are designed to give the trustees of a discretionary trust, or a life tenant who may be thinking of giving up his interest in favour of the widow of the settlor, a period of grace in which to consider the effect of the clause. It is to meet a commitment to the hon. and learned Member for Dover and Deal (Mr. Rees) in Committee. He moved Amendment No. 730 then, to extend the period of exemption to two years from the passing of the Bill. We felt that was too long, but we agree that it is necessary to allow time to consider the matter, and it is therefore extended to 1st April 1977.

Amendment agreed to.

Amendments made: No. 177, in page 79, line 19, after 'end', insert
'or the interest comes to an end before 1st April 1977'.

No. 178, in page 79, line 25, after 'death', insert
'or made before 1st April 1977'.—[Mr. Denzil Davies.]

Clause 104

DISTRIBUTIONS TO CHARITIES ETC.

Amendments made: No. 179, in page 79, line 31, leave out from property' to end of line 35 and insert:
'comprised in a settlement is given to a charity, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act."'.

No. 180, in page 79, line 39, leave out from 'where' to end of line 5 on page 80 and insert:
'property comprised in a settlement becomes the property of a political party qualifying for exemption under this paragraph, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act."'.

No. 181, in page 80, line 9, leave out from 'where' to end of line 14 and insert:
'property comprised in a settlement becomes the property of a body mentioned in subparagraph (1) above, the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act."'.

No. 182, in page 80, line 19, leave out from '(a)' to 'the' in line 22 and insert:
'property comprised in a settlement becomes at any time'.

No. 183, in page 80, line 24, leave out:
'the making of the distribution payment' and insert 'that time'.

No. 184, in page 80, leave out lines 26 to 28 and insert:
'the payment or transfer of the property out of the settlement shall not be a distribution payment for the purposes of Schedule 5 to this Act.";

No. 185, in page 80, line 29, at beginning insert:
'in sub-paragraphs (3) and (4) for the words "sub-paragraph (1) above" there shall be substituted the words "this paragraph

No. 186, in page 80, line 31, leave out 'distribution payment' and insert:
'payment or transfer out of a settlement'.

No. 187, in page 80, line 34, leave out from second 'a' to second 'this' in line 36 and insert:
'payment or transfer out of a settlement

No. 188, in page 80, line 38, leave out 'distribution payment' and insert 'payment or transfer'.—[Mr. Denzil Davies.]

Schedule 14

SETTLED PROPERTY

Amendments made: No. 189, in page 156, line 18, at end insert—

'Interests in possession in Scotland
In paragraph 1(9) of Schedule 5, for the word "Schedule" there shall be substituted the words "Part of this Act" and for the words from "actually" to "that interest" there shall be substituted the words "by virtue of which the person in right of that interest is entitled to the enjoyment of the property or would be so entitled if the property were capable of enjoyment".'.

No. 190, in page 156, line 35, leave out 'both—(a)'.

No. 191, in page 156, line 36, leave out from 'time' to end of line 39.

No. 192, in page 156, line 43, at end insert—
'(2) Paragraph 11(8) of Schedule 5 shall have effect, and shall be deemed always to have had effect, as if after the words "this subparagraph" in each place where they occur there were inserted the words "or paragraph 6(6A) above"'.

No. 193, in page 156, line 43, at end insert—

'Non-resident beneficiaries

12. The following provisions shall cease to have effect—

(a) in section 22(3)(a), the words from "and resident" to "occurred";
(b) in paragraph 4(6) of Schedule 5, the words from "and resident" to "end";
(c) in paragraph 6(6) of Schedule 5, the words from "and resident" to the end;
(d) in paragraph 14(5) of Schedule 5, the words from "and resident" to the end'.

No. 194, in page 157, line 24, at end add
'except that paragraph 11(4) shall be disregarded in determining in relation to any settled property whether the trustees are resident in the United Kingdom'.—[Mr. Denzil Davies.]

Clause 108

FREE LOANS ETC.

Mr. Denzil Davies: I beg to move Amendment No. 196, in page 83, line 29, leave out subsection (6) and insert—
'(6) Subsection (1) above shall not apply in relation to the use of property where the borrower is a body corporate if—

(a) it is not a close company; or

(b) not less than 90 per cent. in nominal value of its issued ordinary shares are shares to which the lender or his spouse is beneficially entitled; or
(c) it is not an investment company and either—

(i) the lender or his spouse is a participator in the company or its holding company or has been such a participator at any time during the year or either of the two preceding years; or
(ii) the leader's spouse died during the year or either of the two preceding years and was at any time during the three years ending with the year in which he died a participator in the company or its holding company.
(6A) Subsection (1) above shall not apply in relation to the use of property where the borrower is a firm if—

(a) the lender or his spouse is a partner or has been a partner at any time during the year or either of the two preceding years; or
(b) the lender's spouse died during the year or either of the two preceding years and was a partner at any time during the three years ending with the year in which he died.

(6B) Subsection (1) above shall not apply in relation to a loan in respect of which any person is chargeable to income tax under Schedule E by virtue of section 61(1) above.'.

Mr. Deputy Speaker: With this amendment we may take Government Amendments Nos. 197 and 198.

Mr. Davies: These amendments fulfil a number of commitments given by my right hon. Friend the Chief Secretary during Committee stage debates on the charge on "free loans". In some respects the amendments go further than the Chief Secretary's undertakings—they are nowhere less generous than those undertakings. The main changes the amendment makes are to exempt from the charge on free loans to companies the following types of loan: a loan to an investment company where the lender or his spouse owns 90 per cent. of the shares; a loan to a non-investment company by the participator's spouse; a loan to a subsidiary company or sub-subsidiary by a participator in the parent company, or his spouse; a loan to a non-investment company—including in appropriate circumstances a subsidiary—by a participator's widow or widower for two full tax years following the participator's death.

Mr. Graham Page: I thank the Minister for going a little further than the


undertaking given by his right hon. Friend the Chief Secretary.

Amendment agreed to.

Amendments made: No. 197, in page 84, line 5, at end insert
'holding company' has the same meaning as in section 154 of the Companies Act 1948;".

No. 198, in page 84, line 9, at end insert
'ordinary shares' has the same meaning as in paragraph 13 of that Schedule;".— Mr Denzil Davies.]

Clause 110

MODIFICATION OF EXEMPTIONS FOR LOANS

Mr. Denzil Davies: I beg to move Amendment No. 199, in page 85, line 5, leave out "made after 6th April 1976" and insert
whether made before or after the passing of this Act.".
The amendment backdates Clause 110 to 12th March 1974. That fulfils another undertaking given by my right hon. Friend the Chief Secretary in Committee.

Amendment agreed to.

Amendment made: No. 245, in page 85, leave out lines 10 to 13 and insert
the borrower's estate shall be treated as increased by an amount equal to the value transferred".—[Mr Denzil Davies.]

Clause 115

INHERITANCE (PROVISION FOR FAMILY AND DEPENDANTS) ACT 1975

Amendment made: No. 200, in page 92, line 24, leave out
'the expiration of six months after'.—[Mr. Denzil Davies.]

Clause 117

STAMP DUTY: EXEMPTION FOR TRANSFERS OF LOAN CAPITAL

Amendment made: No. 201, in page 94, line 30, leave out subsection (5) and insert—
'(5) In this section "loan capital" means—

(a) any debenture stock, corporation stock or funded debt (by whatever name known) issued by any body corporate or other body of persons formed or estab-

lished in the United Kingdom or any capital raised by any such body, being capital which is borrowed, or has the character of borrowed money, whether it is in the form of stock or any other form; and
(b) stock or marketable securities issued by the government of any country or territory within the commonwealth outside the United Kingdom.'.—[Mr. Denzil Davies.]

Schedule 15

REPEALS

Amendments made: No. 202, in page 160, line 20, column 3, at beginning insert 'Section 24(2)'.

No. 279, in line 32, leave out 'Section 14(3)'.

No. 195, in line 36, column 3, at beginning insert
'Section 30(1) and (2)'.

No. 203, in line 36, column 3, at beginning insert Section 32'.—[Mr. Denzil Davies.]

Mr. Robert Sheldon: I beg to move Amendment No. 204, in page 161, line 9, at end insert—
'8. The repeal of section 24(2) of the Income and Corporation Taxes Act 1970 and section 32 of the Finance (No. 2) Act 1975 does not affect the operation of those provisions in relation to any allowance or benefit payable in respect of a period before the appointed day for the purposes of the Child Benefit Act 1975 and the Child Benefit (Northern Ireland) Order 1975.'.
Amendments Nos. 204 to 206 are additions to the repeal schedule consequential upon Government New Clause 23 dealing with the tax treatment of child benefit.

Amendment agreed to.

Amendments made: No. 217, in page 161, column 3, leave out lines 15 to 18 and insert—
'In section 19, in subsection (2)(a)(iii) and (iv) the word "with"; and subsection (7).'

No. 205, in page 162, line 4, column 3, at beginning insert—
'in section 22(3)(a), the words from "and resident" to "occurred".'.—[Mr. Robert Sheldon.]

Amendment proposed: No. 206, in page 162, column 3, leave out lines 6 and 7 and insert—
'In Schedule 5—in paragraph 4(6), the words from "and resident" to "end"; in paragraph 6(6), the words from "and resident" to the


end; paragraph 6(7); paragraph 12(8); in paragraph 14(5), the words from "and resident" to the end.'.—[Mr. Robert Sheldon.]

Sir Geoffrey Howe: The last four words of the last amendment to the repeal schedule are
'and resident' to the end".
Here we are, all resident to the end. We have listened to some remarkable things during the course of the night. At one point the Minister of State sounded as though he were giving an explanation in Welsh of a clause that had been written in Sanskrit. Clauses have passed by at such breathtaking speed that most of us have had little chance to understand them. Clauses of this importance and consequence for the citizen and taxpayer should not be treated, in the words of The Guardian leading article:
literally as though they were going through a parliamentary sausage machine".
In an earlier debate the Financial Secretary was manifestly nonplussed by his attempts to defend the fourth thoughts, which had replaced the third thoughts, on how to present a taxation system to cover benefits in kind represented by motor vehicles.
It is a lamentable way of dealing with fiscal legislation, one of the least impressive parts of our parliamentary machine. We can only join in mourning that we are "resident to the end" of this alleged legislative process. I do not wish to oppose the amendment, but simply to call for two minutes' silence.

2.30 a.m.

Mr. Robert Sheldon: I thought a point of substance was to be raised on this important amendment to this important schedule. I understood that the right hon. and learned Gentleman was likely to make a much wider and bigger point than the amendment suggests. Nobody can deny that our procedures are not the best that could be devised. How could we say that at 2.30 a.m. The argument goes a long way beyond the province of the Finance Bill, and has much to do with the way we organise our procedures.
There are Committees set up to deal precisely with these matters, and I hope that they will take note not only of what the hon. and learned Gentleman has said but of what has been felt by my hon. Friends, who have heard a number of speeches that have been less adequate and

less comprehensve than might have been allowed by a time more suitable for discussiong some of the matters before us.
I accept that, but this it not the occasion to debate such matters.

Amendment agreed to.

Bill to be read the Third time this day, and to be printed. [Bill 206.]

STATUTORY INSTRUMENTS

Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &amp;c.)

DOUBLE TAXATION RELIEF

That an humble Address be presented to Her Majesty, praying that the Double Taxation Relief (Taxes on Income) (Fiji) Order 1976 be made in the form of the draft laid before this House on 26th April.—[Mr. Denzil Davies.]

That an humble Address be presented to Her Majesty, praying that on the ratification by the Government of the Socialist Republic of Romania of the Convention set out in the Schedule to the Order entitled the Double Taxation Relief (Taxes on Income) (Romania) Order 1976, a draft of which was laid before this House on 26th April, an Order may be made in the form of that draft.—[Mr. John Ellis.]

That an humble Address be presented to Her Majesty praying that on the ratification by the Government of Spain of the Convention set out in the Schedule to the Order entitled the Double Taxation Relief (Taxes on Income) (Spain) Order 1976, a draft of which was laid before this House on 26th April, an Order may be made in the form of that draft.—[Mr. John Ellis.]

That an humble Address be presented to Her Majesty, praying that on the ratification by the Government of the Democratic Republic of the Sudan of the Convention set out in the Schedule to the Order entitled the Double Taxation Relief (Taxes on Income) (The Democratic Republic of the Sudan) Order 1976, a draft of which was laid before this House on 26th April, an Order may be made in the form of that draft.—[Mr. John Ellis.]

Question agreed to.

Addresses to be presented by Privy Councillors or Members of Her Majesty's Household.

SEA FISHERIES

That the Herring Industry Board (Exchequer Loans) Order 1976, a copy of which was laid before this House on 25th May, be approved. —[Mr. John Ellis.]

Question agreed to.

DIRECT ELECTIONS TO THE EUROPEAN ASSEMBLY

Ordered,
That Mr. David Steel be discharged from the Select Committee on Direct Elections to the European Assembly and that Br. Jeremy Thorpe be added to the Committee.—[Mr. John Ellis.]

DIVORCE (LEGAL AID)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. John Ellis.]

2.32 a.m.

Mr. Leo Abse: I declare my interest as a practising solicitor, and I speak, hut, I hope, not pretentiously, as one of the architects of our reformed divorce law.
The fundamental principle of the reformed divorce laws of this country was the assurance that, when a marriage had irretrievably broken down, it could be ended with the maximum fairness and the minimum bitterness, distress, and humiliation. The changed law had an overriding aim: it was to guarantee that the sad separation of a husband and wife could take place with dignity and understanding, as free as possible from the recriminations, scavenging of motives, and cruel distancing of parties that were activated by our old punitive laws, so lacking in insight. Within the new framework, the parties at last have been able to be guided to deal fairly and reasonably over matters concerning maintenance, over the matrimonial home and above all, to come together—not at arm's length—to mitigate the consequences to the real victims of marriage breakdown, the children, who now no longer can easily be used as weapons in a battle of the sexes that was inflamed, not contained, by our old divorce laws. No one denies that very substantially, although, of course, not perfectly, the new divorce laws have worked reasonably well.
In future, however, if this House and the country permit the Lord Chancellor's shabby announcement of intention that legal aid, except in a derisory attenuated form, will not be granted for divorce, ultimately the benefits of our reformed divorce laws will be confined to the rich.
The poor and less-well-off, particularly the deserted or badly treated wives and their children at the most vulnerable moment in their lives, will find themselves bewildered and lost, in a no-man's land with naught for their comfort and aid but bewildering forms and impersonal, anonymous, undertrained court officials.
Legal aid is granted to four out of five of the 90,000 wives who annually file divorce petitions, the vast majority mothers with young children. These are the people who will find themselves, in future, in a cruel limbo.
The announcement of the Lord Chancellor withdrawing legal aid is no slight administrative change occasioned by Treasury pressure; it is a fundamental assault, albeit elliptically, in the rationale behind our reformed divorce law, which was established upon the firm base of a well-tried and efficient legal aid mechanism. The new divorce law was, with intent, enmeshed with our legal aid scheme. The law declared that conciliation was the desirable objective; the legal aid scheme was the means to bring the conciliation about. The very small number of divorces which today are fought, and the very small number of disputes about the custody of the children, are tributes to the comparative efficiency of the system.
Today, unlike yesteryear, the overwhelming majority of matrimonial disputes are settled by negotiation. Legal aid has shown itself to be aid to agree, not aid to fight.
If, as now appears to be intended, legal aid is to be granted only in defended cases, the Lord Chancellor's announcement is a veritable incitement to a recrudescence of the old battles that disgraced our divorce courts and wreaked such havoc upon the children of the warring parties. One of the main benefits of the existing legal aid scheme is that the parties receive advice that prevents entrenched positions being taken up. The parties have a catharsis as they initially pour out their difficulties to a solicitor and then realistically have to face up to the consequences that flow from the breakdown of the marriage.
In the overwhelming majority of cases, when the client comes to a solicitor, she


is aware that her marriage has irretrievably broken down. Her main concerns, the matters upon which she needs and demands guidance, are related to the children, the home and the future finances of the soon-to-be-broken family unit. These are the matters that must be resolved initially—not subsequently—before the divorce proceeds.
The good family lawyers—and they are not found in the large commercial practices in the City or the West End—who do the bulk of legal aid matrimonial work in the cities and large towns, usually specialise in and follow the practice, encouraged by the courts, of striving hard for agreement between the parties on the issues of children and money. A new skill—welfare benefit planning—has consequently emerged. Provided, and only provided, the parties co-operate, it is possible to raise the incomes of both the parties to a divorce suit by judicious use of the taxation rules and available welfare benefits.
The people who gain most from this are smack in the existing legal aid bracket. The more agreement there is between them, the less will be the need for litigation and the more likely it is that the children will be left in better economic circumstances with two participating parents. The collapse of legal aid will sabotage all these efforts.
The defence in the Lords and in The Times, by the Lord Chancellor, for this dismantling of divorce legal aid fell far short of his usual formidable forensic skill, no doubt because he is too sensitive and compassionate a man to operate with enthusiasm such butchery on behalf of the Treasury. As I understand the Lord Chancellor, he pleads first, that in any event too high a proportion of the amount spent on legal aid goes into divorce proceedings. That is a droll argument. It is no doubt chastening, but it is a fact, that more than 100,000 petitioners and respondents, mostly mothers, are annually given legal aid in divorce. They are given it because they are eligible and desperately need it. We do not abolish matrimonial distress among the less-well-off by pontificating that too much of it exists and then, in the manner of Pontius Pilate, refuse legal aid. That will not end matri-

monial breakdown—it will hugely increase the distress associated with it.
I hope that the Solicitor-General will not be so jejune as to adopt that quaint Victorian argument. If the proposition put forward was that we rationalise the procedure and save costs in these dire times by ending the necessity for the simple case to be conducted in open court, with counsel, thus saving perhaps £30 to £40 per case, few would dissent. To achieve that object, if justice is to be done, there must be available the preliminary legal aid and advice that I have catalogued to ensure that the divorce degree granted in a private office—as is now proposed in cases where there are children, or where wives have suffered—brings no unnecessary hardship and injustice to the family.
Secondly, the Lord Chancellor pleads that in any event he will make available the so-called "green form" scheme for divorce advice. This is indeed a dusty answer to the anguish of a bewildered, deserted wife. This scheme gives a client, if he or she is eligible after being means-tested by the solicitor, as the rule provides, the right to a little advice—no more. The disposable income and capital rules of the scheme are such that, apart from such cases as when the woman is in receipt of supplementary benefit, she is officially required to make payment by way of contributions. In parctice, the solicitor knows that the woman often has not got a penny with her and, if asked for a contribution, would go away, abandoned.
Many solicitors, as I well know, waive the contribution, not wishing to extort money where so little exists, and get back what money they can from the legal aid fund. With the maximum ceiling in existence, given the time taken by a solicitor required to do the means-testing and the administrative work in claiming the amount, and given present inflation and overheads, I would be surprised if, on average, a solicitor can today make more net profit—before tax —than £5 using the green form scheme.
It is blatantly obvious that the time that would in these circumstances be given to considering the welfare and future of the children, the matrimonial home and the maintenance of a wife and children, would be utterly inade-


quate. Even after perfunctory consideration and advice had been given the wife would have to go out from the solicitor's office to the street to begin her trek to the court office to obtain the forms and seek to recollect, in an emotional and often traumatic condition, some of the advice that she had received before attempting to fill in the forms and affidavits and hand the botched-up information, which could so adversely affect her, to harassed court clerks.
I do not know what world the Treasury officials demanding this pound of flesh live in, but it is a world miles apart from the waiting room of any legal aid solicitor or the surgeries of Members of Parliament. I hope that the Solicitor-General will not have the insouciance to suggest that the green form scheme mitigates the shameful suggestion that in future the legal profession is to be substantially excluded from giving aid in divorce proceedings except to the comfortably-off. I hope, too, that we shall be spared the innuendo that some time. somewhere, saving money in this way will lead to opening up legal advice centres in working-class areas. If that has to be done on the backs of one-parent families, it is best not attempted.
Nor, I trust, shall we be treated to the argument that there is no alternative way of saving public money, as must be done these days, within our legal services. The Lord Chancellor would be well advised to demand that the Home Office implement in full the James Report, which recommends the redistribution of criminal business from the Crown courts to the magistrates' courts. Less criminal work in the Crown courts would save much legal aid expenditure, and excessive sensitivity to the right of a jury for those charged with criminal offences at a time of national economic travail is an indulgence that we cannot permit when it is done at the expense of denying legal aid to wives and children embroiled in a family breakdown.
Many familiar with this field, such as the former Lord Chancellor, Lord Hailsham, who spoke wisely and with considerable weight against the proposal in another place, share my doubts that at the end of the day this ill-thought-out proposal, unless substantially modified, will not lead to any significant reduction in legal aid expenditure. Petitions,

inevitably badly drafted in this do-it-yourself proposal, will be so frail that a respondent will be advised to defend, and this is bound to lead to legal aid being given to redraft and amend the original petition.
It will provoke more defended cases. It will provoke legally-aided disputes, which will unnecessarily arise after the decree in respect of ancillary proceedings, because it will not have been possible for the preventive action to be taken in the first place. It will mean setting up a new bureaucratic system to determine who will and who will not have to pay the court fee of £16 for a petition, the £1 fee for affidavits—and similarly, since people so frequently lose their marriage certificates, the fee of £4·50 for a copy, to devise a system in which they may be obtained for some freely.
It will mean, inevitably, as the registrars, deprived of solicitors appearing before them rendering assistance, find themselves acting more in an investigatory than an adjudication capacity, that the appointment of more registrars will be required. It will mean, of course, the appointment of a host of new court officials and, until then, unconscionable delays. It will undoubtedly mean that, lacking the probing skills of petitioners' solicitors, orders not really truly representative of the means of the parties will be made, and consequently far greater sums will fall on the Department of Health and Social Security.
I fought for many years to reform the divorce laws of this land. I did not fight to reform them for the wealthy alone. I fought particularly to reform them for the benefit of the children of broken marriages. The Lord Chancellor would be well advised to inform the Treasury now that if the proposal that legal aid is to be withdrawn from any deserted or ill-treated mother of children under 16 is persisted in, it will meet with unremitting hostility in and out of this House.
I hope that the consultations that the Lord Chancellor is presently having, and the reply that the Solicitor-General will give me, will be the precursors to a complete reappraisal of a proposal that falls wholly into the category of panic economic measures, rightly condemned both by the Prime Minister and the Chancellor of the Exchequer.

2.45 a.m.

The Solicitor-General (Mr. Peter Archer): While I do not accept all that my hon. Friend the Member for Pontypool (Mr. Abse) has said in somewhat dramatic terms, I think that the House will be grateful to have had the opportunity of airing the matter at an early stage, even though we shall be discussing it at greater length before the proposals are implemented.
I begin by saying that individuals do not suffer a sea change when entering Government. It is not true that people like my noble and learned Friend the Lord Chancellor, my right hon. and learned Friend the Attorney-General and I, who for years have campaigned for an extension of legal services, suddenly, on taking office, experience an aversion to them and take a compulsive delight in reducing them.
In order to approach this matter rationally we have to assess the alternative courses of action which would be open to my noble and learned Friend, and their probable consequences. I therefore propose, in the very brief time available to me, to set out my view of the problem confronting my noble and learned Friend, of the solution that he proposes, and of its likely consequence.
Let me make it clear that my noble and learned Friend is not proposing to act without consultation. These proposals are not intended to take effect until some time in 1977. My noble and learned Friend made an early announcement precisely so that they can be discussed.
I turn first to the problem. We have to state it in the whole context of the need to contain public expenditure. The Government take the view that if we fail to do that the consequences for all of us and for our children's children will be bleak indeed. I appreciate that there are those who dispute that thesis. We cannot discuss that within the confines of this debate, but wiser heads than mine have explained the Government's reasons.
I say only that I wish, as my noble and learned Friend wishes, that legal services could be exempted from that policy, but my noble and learned Friend could hardly say to the Chancellor of the Exchequer "Not legal services. Let their share fall on the education budget, on the hospital building programme and on

social services." We have to work within the world as it is.
But the problem goes beyond that. My noble and learned Friend has made clear since he assumed office that there are improvements that he wishes to make to legal services, in particular by raising the limits of financial eligibility for legal aid. That is still his wish. I would like to eliminate some misunderstandings about this. We are discussing not only the upper financial limits on legal aid, but a whole range of matters related to financial arrangements for legal aid, and in this context the expression "legal aid" is intended to include legal advice and assistance.
Further, my noble and learned Friend wishes, as he has always wished, to extend the provision of law centres to areas of greatest need.
If there is to be any hope for all that we must take some clear decisions about priorities.
In fact, expenditure on civil legal aid has risen sharply in recent years. In the year 1971–72, this head of expenditure amounted to £11·5 million. In the current year, 1976–77. it is estimated that it will amount to £34·5 million. That, on any showing. is a very substantial increase, even allowing for the effect of inflation. That is not a quaint Victorian argument, but a hard fact. The Government's expenditure plans to 1979–80 require that after this year's expenditure, civil legal aid should remain reasonably constant in real terms, so the purpose of the changes is not to produce an absolute cut in expenditure but to contain expenditure at its present level. In fact, if we take civil and criminal legal aid together. a total expenditure that has doubled, in real terms, over the last five years is expected to incease again by nearly 25 per cent.
The proposals that we are considering are not even the running that we do to stay in the same place; they represent the running that is necessary to prevent ourselves travelling backwards even faster.
I therefore want to make it crystal clear that if the proposals for limiting legal aid for divorce are rejected, the saving will have to be found elsewhere within the civil legal aid budget. There are no easy options.
My noble and learned Friend has to decide where and how economies can best be made with a minimum of hardship. He proposes to reduce the need for representation in undefended divorce proceedings, thus making legal aid unnecessary. His procedural proposals will entail decisions that belong to the Matrimonial Causes Rule Committee, and he will be laying his proposals before the committee.
These proposals are a logical extension of the major innovations that have already taken place since I used to spend mornings doing undefended divorces. The first of these was the extension of divorce jurisdiction to the county court. The second was the radical alteration in our substantive law of divorce, which was effected by the Divorce Reform Act 1969. to which my hon. Friend has referred and with which he was closely associated. The third of these was the introduction, at the instance of Lord Hailsham, the Lord Chancellor in the former Conservative Government, of what is called the "special procedure".
It may be worth pausing a moment to make that procedure clear. Where the respondent indicates an intention not to defend, the petitioner is required to complete an affidavit on a form that is available in the court office, to swear it, and to file it with the court. The affidavit provides the evidence to support the allegations in the petition, and normally that will be the whole of the evidence.
The petition, affidavit, and any other papers there may be, are then considered by the registrar of the court without the attendance of the parties. If the registrar is satisfied, he gives a certificate to that effect and a decree nisi is pronounced by the judge in open court without the attendance of either of the parties and without any hearing. So the question of representation does not arise. There is no hearing where anyone can be represented.
If the registrar, when he reads the papers, is not satisfied, he may ask for further information before giving his certificate, or order that the case may be heard by the judge in open court, and in that situation I would expect legal aid to be available, as I shall explain later.
At present this procedure applies to all undefended divorce cases where there are no children under 16, except for cases based on allegations of unreasonable behaviour. This is an arrangement that combines economy with humanity. It has rendered it unnecessary for thousands of people to appear in court and join publicly in the dissection of their dead marriage. It has also reduced the cost of proceedings in a major field of litigation, whether the cost is met by legal aid or by private funds.
My noble and learned Friend proposes to extend that special procedure to all undefended cases. Where there are children, the judge, where he feels it appropriate, will still be able to ask the petitioner to attend court to discuss the arrangements for them. Normally, where he does so he will be likely to deal with the matter in his private room.
It follows that legal aid will not be needed for representation on the hearing of the divorce itself, for the very good reason that there will not be a hearing. Legal advice and assistance will still be available under the green form scheme, and I appreciate that it is about this that my hon. Friend is chiefly concerned. If to point that out is insouciance, I plead guilty to insouciance.
I should like to confirm, as clearly as I can, that the scheme will include advice on the petition itself, assistance in preparing the petition, assistance in preparing the affidavit, and conciliation and negotiations with a view to the settlement of such matters as maintenance, family property and the custody of the children —matters that my hon. Friend described.

Mr. Abse: All that for £25?

The Solicitor-General: Perhaps I should also make clear what is sometimes a source of confusion. From my hon. Friend's intervention I suspect that there is confusion even in his mind.
The green form scheme is sometimes known as the £25 scheme. I think that that expression is misleading. This figure relates to the fact that although there is no limit on the amount of work that a solicitor may do under it, he must obtain authority from the Law Society where his costs are likely to exceed £25, and, of course, under the new arrangements there are likely to be more cases where solicitors provide advice and assistance in


excess of this figure. But I can reassure them that, provided they obtain authority from the Law Society, they will be paid for all the work which is required, which was described in some detail by my hon. Friend.
The saving, therefore, will be in relation to representation. The occasion for it will not normally arise on divorce, but, of course, it will be available in special cases. It is difficult, particularly at this stage, to list in detail what those special cases might be, but they will probably include situations where the hearing has been directed in open court; for example, if the registrar feels that there is a difficulty about jurisdiction, or where the petitioner suffers from serious illness or incapacity.
But, of course, legal aid will continue in any event to be available for particular parts of the proceedings. Again, it is too early to list them in detail, but I would expect it to be available in the following cases: where the petitioner seeks to present a petition for divorce before the expiration of three years from the date of the marriage; where there is an application for an injunction, including an interim injunction; where a claim for ancillary relief requires some issue to be resolved; or where there is a dispute about the children.
It remains to consider the adequacy of the limits applying to the green form scheme. My hon. Friend expressed concern that some people who are now within the legal aid limits will not be eligible for aid and advice because those limits are different. Of course, that is an important matter, but the estimates available to my noble and learned Friend suggest that of those who currently obtain legal aid for divorce not more than 10 per cent. are out of scope for advice and assistance under the green form. This 10 per cent. represent the top 10 per cent. who are only eligible for legal aid on payment of a relatively substantial contribution, which may often exceed the cost of the necessary advice and assistance under the new arrangements. But I should add that this is one of the matters which my noble and learned Friend will be keeping under close consideration in preparing to implement his proposals.
Let me now say a word on the use that may be made of the savings. Of course,

the first call on these savings will be our commitment to contain public expenditure. During the first two years after the introduction of the change this will not be easy, bearing in mind that the legal aid fund will still be meeting bills on cases completed before the change at a time when the income from contributions will have stopped. But, after this initial period, it is hoped that the savings will be sufficient to make real improvements in our financial arrangements for legal aid and for legal advice and assistance and to extend the provision of law centres in areas of greatest need. Of course, there can be no promise as to when and how much my noble and learned Friend will do, but he will do as much as possible as soon as possible. Those who know him will appreciate that he will do it with a glad heart.
Let me add that I am mindful of the concern among certain sections of the legal profession about the effect of the proposals on the income of those who practise in this field.
That is a legitimate concern. Any professional body, like any trade union, is entitled to point out that the livelihood of its members is a factor to bear in mind when proposals are considered. Certainly I should not lightly dismiss that. Legal aid for divorce was once an important element in my own income.
I must not anticipate what may be said either to or by the Royal Commission on Legal Services, but I believe that both branches of the legal profession have survived more disturbing vicissitudes. I have already explained that the legal profession may look forward to a period when the total legal aid bill is expected to increase substantially, and I believe that the future for the Bar holds more promise than when I was called. There is no danger that the demands for the services of the legal profession will be reduced. I know that the major concern of the professional bodies is that matters should be so organised that the need for advice among ordinary bewildered people in an increasingly complicated world should be fulfilled as effectively as possible. That is the purpose of these proposals.

Question put and agreed to.

Adjourned accordingly at three minutes to Three o'clock a.m.